Public Disclosure Authorized
75926
Public Disclosure Authorized
Public Disclosure Authorized
Public Disclosure Authorized
IDA 17
IDA’s Support to Fragile and Conflict-Affected States
IDA Resource Mobilization Department
Concessional Finance and Global Partnerships
March 2013
Fiscal Year (FY)
July 1 — June 30
Acronyms and Abbreviations
ADB
AfDB
CAFEF
CAS
CCSD
CMU
CPIA
CPR
CRW
CSO
DRC
DPKO
ERL
EVI
FPD
FCSs
FSF
GNI
HDI
HDN
HIPC
HR
IBRD
IDA
IFC
Asian Development Bank
African Development Bank
Conflict Affected and Fragile
Economies Facility
Country Assistance Strategy
Center for Conflict, Security and
Development
Country Management Unit
Country Policy and Institutional
Assessment
Country Performance Rating
Crisis Response Window
Civil Society Organization
Democratic Republic of Congo
Department of Peace Keeping
Operations
Economic Recovery Loan
Economic Vulnerability Index
Financial and Private Sector
Development
Fragile and Conflict-affected States
Fragile States Facility
Gross National Income
Human Development Index
Human Development Network
Heavily Indebted Poor Country
Human Resources
International Bank for Reconstruction
and Development
International Development
Association
International Finance Corporation
IL
ISN
JAMs
JSEA
MDB
MDG
MDRI
MDTF
MIGA
MTR
PBA
PC
PCNA
PCPI
PDNA
PPR
PRSP
PSG
RE
SDN
SDR
UA
UN
UNDP
WBG
WDR
Investment Lending
Interim Strategy Note
Joint Assessment Missions
Joint Social and Economic
Assessment
Multilateral Development Bank
Millennium Development Goal
Multilateral Debt Relief Initiative
Multi-Donor Trust Fund
Multilateral Investment Guarantee
Agency
Mid-Term Review
Performance Based Allocation
Post Conflict
Post-Conflict Needs Assessments
Post-Conflict Performance
Indicators
Post-Disaster Needs Assessment
Portfolio Performance Rating
Poverty Reduction Strategy Paper
Peace-building and State-building
Goals
Re-engaging
Sustainable Development Network
Special Drawing Rights
Unit of Account
United Nations
United Nations Development
Programme
World Bank Group
World Development Report
TABLE OF CONTENTS
EXECUTIVE SUMMARY ........................................................................................................... i
I. INTRODUCTION................................................................................................................... 1
II. BUILDING LEGITIMATE INSTITUTIONS AND ACHIEVING DEVELOPMENT
PROGRESS IN FCSs: THE ROLE OF IDA ............................................................................. 1
A. Challenges in Breaking Out of Fragility .............................................................................. 1
B. IDA’s Operational Approaches to Support FCSs ................................................................ 3
III. REVISED ALLOCATION FRAMEWORK FOR FCSs .................................................. 13
A. Principles that Should Underpin the IDA Resource Allocation Framework ..................... 14
B. Current Allocation Framework for FCSs ........................................................................... 15
C. Proposed Allocation Framework for IDA17...................................................................... 18
IV. IMPLICATIONS AND TRADE-OFFS .............................................................................. 32
V. CONCLUSION AND ISSUES FOR DISCUSSION .......................................................... 38
List of Tables
Table 1: Base Allocation as a Share of IDA16 Allocation ................................................................... 29
Table 2: Infrastructure Unit Costs Estimates ...................................................................................... 30
Table 3: IDA17: Impact of the Proposed Package .............................................................................. 34
Table 4: IDA17: Impact of the Proposed Package on Allocations at Regional Level ............................. 37
Table 5: The Proposed Package: Impact on the Overall Performance Orientation of the Allocation System
by Performance Quintile .................................................................................................................. 37
List of Charts
Chart 1: IDA’s Resource Allocation Framework ................................................................................ 15
Chart 2: FY13 IDA Allocations to FCSs ........................................................................................... 17
Chart 3: Recent Progress in Policy and Institutional Reform in FCSs .................................................. 17
Chart 4: Comparison of Current Exceptional Regimes and the Proposed Exceptional Regime for “Turnaround” Countries............................................................................................................................ 19
Chart 5: Possible Process for the Provision of Exceptional “Turn-around” Support .............................. 25
Chart 6: Recent Evolution of GNI Per-capita in IDA-only Countries ................................................... 26
Chart 7: Estimated IDA16 Per-capita Allocations by Income Groups .................................................. 26
Chart 8: Impact of Modifying the CPR Exponent in the Allocation Formula ........................................ 27
Chart 9: Impact of Implementing the Proposed Package ..................................................................... 33
Chart 10: Impact of the Proposed Package on Per-capita Allocations .................................................. 36
Chart 11: Impact of the Proposed Package on Per-capita Allocations .................................................. 37
Chart 12: The Proposed Package: Impact on the Overall Performance Orientation of the Allocation
System during IDA17 ...................................................................................................................... 37
List of Boxes
Box 1: Formulating Fragility-Sensitive Country Assistance Strategies .................................................. 7
Box 2: Building Legitimate Institutions for Justice and Security in FCSs: Recent Learning .................. 11
Box 3: Exceptional Regimes: How Do They Compare to a Set Aside? ................................................ 16
Box 4: Options for Increasing the Poverty Orientation of the Allocation System .................................. 28
List of Annexes
Annex 1: IDA-eligible Countries, FY13 ............................................................................................ 39
Annex 2: WBG Existing Support to Staff Working in FCSs ............................................................... 40
Annex 3: Allocation of Concessional Resources to FCSs ................................................................... 42
Annex 4: Portfolio Performance Rating: Method of Calculation and Incorporation in the Allocation
System ............................................................................................................................................ 45
Annex 5: Exceptional Allocation Regimes: an Illustration .................................................................. 46
Annex 6: Post-Conflict Performance Indicators Framework ............................................................... 50
Annex 7: The New Deal, Peace- and State-Building Goals and Indicators ........................................... 53
Annex 8: Comparing Current Exceptional Regimes and the Exceptional Regime for “Turn-Around”
Countries ........................................................................................................................................ 56
Annex 9: Definitions and Assumptions ............................................................................................. 60
EXECUTIVE SUMMARY
i.
Fragility and conflict are among the greatest development challenges of our time.
Countries affected by fragility and conflict face political, security, economic and environmental
stresses that cannot be mitigated by their weak institutions. As a result, these countries
experience repeated disruptions in their development progress and stagnating or deteriorating
economic and social indicators. As highlighted by the 2011 World Development Report (WDR),
lessons from experience show that sustained progress in resilience and security can unlock
significant development potential in Fragile and Conflict-affected States (FCSs). However,
overcoming fragility and conflict is a long-term process, subject to several risks, that requires
sustained efforts by a determined national leadership. Support from international actors is also
vital to help contain the stresses that could derail progress.
ii.
IDA plays a central role in enhancing the effectiveness of development assistance in
FCSs.
IDA’s country-based model is particularly important in addressing the
heterogeneity of FCSs. IDA provides a vital coordination platform that helps minimize risks
and transactions costs linked to the complex aid architecture in FCSs, including through the
implementation of Multi-Donor Trust funds (MDTFs). IDA plays a leading role in knowledge
generation and sharing as well as in helping build systems and institutions for an effective aid
delivery. Improving development effectiveness in FCSs is one of the five themes of the Bank’s
Post-Crisis Directions Strategy and a priority in recent IDA replenishments, including IDA16. In
this context, the Bank has taken deliberate action to more effectively respond to the special
circumstances of FCSs, by adopting more tailored operational and funding approaches. Notably,
there has been a significant decentralization of staff to the front lines; increased funding of
operational work through Bank budget; and more flexible operational procedures. In addition,
IDA is providing exceptional financial support to post-conflict (PC) and re-engaging countries
(RE). These efforts are showing a positive impact on IDA’s portfolio performance in FCSs.
iii.
Nevertheless, as highlighted by the 2011 WDR, the slow development progress of
most FCSs calls for a paradigm shift in the way assistance is delivered to these countries.
In line with the recommendations of the 2011 WDR, the Bank has embarked on an ambitious
agenda to improve its effectiveness in FCSs. This agenda aims at modernizing the Bank’s
business model to better respond to the FCSs changing needs and demands. It also aims at better
managing risks in fragile environments and to be more responsive, quicker and flexible in our
engagement in these countries. This agenda includes: (i) designing integrated WBG strategies
that better address the drivers of conflict and fragility and build on the synergies between IDA,
IFC and MIGA; (ii) creating more agile operational policies and practices that promote
responsiveness and adaptation in low capacity and high risk environments; (iii) building a
stronger community of practice on FCS issues across regions; (iv) shifting more resources to the
front lines to enhance the extent and depth of client engagement; and (v) increasing funding to
respond to the development needs of FCSs.
iv.
As part of this broad agenda and the IDA 16 commitments, Management has
developed a revised allocation framework for FCSs for implementation in IDA 17. Drawing
on feedback from Participants at the IDA16 MTR, Management has developed a comprehensive
allocation framework for FCSs which links considerations of enhanced support with operational
effectiveness and performance incentives. In designing the framework, Management has strived
to: (i) build on IDA's implementation experience, including addressing the need to strike a
balance between rules and judgment; (ii) better reflect the recent understanding on fragility and
-ii-
conflict, including integrating the work of the g7+ under the New Deal; and (iii) simplify the
allocation system while ensuring a meaningful engagement in all countries.
v.
The proposed framework rests on two main components which received broad
support by the Participants at the IDA16 MTR, namely: providing exceptional support to
countries facing "turn-around" situations; and increasing the poverty-orientation of the regular
Performance-Based Allocation (PBA) system. In addition, the proposed framework includes
measures to ensure that IDA funding allows for meaningful country engagement.

Introduction of an exceptional allocation regime for countries facing "turn-around"
situations. Starting in IDA17, this regime would cover future PC and RE countries as
well as other countries experiencing significant new opportunities for change.
Allocations to eligible countries will be based on performance, as per the Post Conflict
Performance Indicators (PCPI) and portfolio performance ratings, and needs, reflected in
notional maximum per-capita allocation levels as under the existing PC and RE regimes.
Given that these notional maximum per-capita allocation levels have not been adjusted
for inflation in several years, it is proposed that they be adjusted. To smooth the
transition of countries currently under the existing exceptional PC and RE regimes, either
to the regular PBA system or to the new exceptional “turn-around” regime (at the latest
by the end of IDA17), these countries would be subject to a case-by-case extension of
their phasing out period for the duration of IDA17 while receiving the adjusted notional
per capita allocations.

Increasing the poverty-orientation of the regular PBA system, by reducing the Country
Performance Rating exponent. This would allow an increased IDA engagement in the
broader group of FCSs, most of which have low per-capita Gross National Income (GNI)
levels, while preserving the principle of performance orientation in the allocation system.

Ensuring adequate funding for meaningful country level engagement. This addresses the
fact that IDA financing remains insufficient to support an effective engagement in several
small states. In this context, Management proposes to increase the minimum base
allocation from its current level of SDR 3 million. This measure will benefit primarily
small states whose entire IDA allocation is determined by the minimum base allocation
and many of which are highly vulnerable and fragile.
In addition, if the MDRI netting out were to be eliminated, it would further strengthen the
support for FCSs receiving small allocations and simplify the allocation framework.
vi.
The implementation of the proposed framework could significantly increase IDA's
financial support to FCSs. Under illustrative scenarios presented in the document, the
implementation of the framework with indicative parameters (e.g., 50 or 100 percent increase in
the notional per-capita allocation for exceptional support; a reduction in the CPR exponent from
5 to 4) could increase IDA's financial support to FCSs during IDA17 by 52 to 76 percent. As a
result, IDA's allocations to FCSs during IDA17 would increase from 12 percent of the allocable
envelope to between 18 and 21 percent.
vii.
There would be significant trade-offs that need to be considered. Assuming, for
illustrative purposes, an IDA17 replenishment of the same amount as IDA16 and that transitional
support is provided to India in an amount equal to two-thirds of its IDA16 capped allocation,
increasing IDA's support to FCSs would lead to a reduction in IDA's support to non-FCSs by 7 to
-iii-
10 percent. Within the non-FSCs group, there would be a redistribution of resources from
stronger to weaker performers, with potentially significant reductions for some countries which
are still among the poorest and most vulnerable. The allocation system would nevertheless retain
the principle of performance orientation with more resources still being channeled to better
performers (as measured by the CPR). Under the illustrative scenarios presented in this
document, countries in the top performance quintile would benefit from per-capita allocations
more than twice those countries in the lowest quintile. These ratios are comparable to those
observed for IDA14 and IDA15.
viii. The extent of the trade-offs will depend, among others, on the size of the
replenishment and the criteria and parameters guiding the implementation of the proposed
framework. Given these considerations, Management seeks endorsement of the proposed
framework, while the magnitude of the key parameters (e.g., notional maximum per-capita
allocations, reduction of the CPR exponent) could be decided in the June meeting in the context
of the broader discussion of the “ask” and financing scenarios.
I.
INTRODUCTION
1.
Supporting Fragile and Conflict-affected States (FCSs) is one of the special themes
of IDA16. At the IDA16 Mid-Term Review (MTR), Participants reviewed the status of
implementation of agreed actions to enhance IDA’s operational effectiveness in FCSs and
provided initial feedback on options to adjust and simplify the framework for allocating
resources to these countries. At the time, Participants welcomed the progress made by IDA in
implementing the agreed actions and encouraged the Bank to continue working on this topic with
the international community, in particular with the g7+ and the dialogue on State and Peace
Building under the “New Deal.” Regarding the allocation of resources to FCSs, Participants
broadly supported the possibility of providing exceptional support for countries undergoing
“turn-around” situations and increasing the poverty-orientation of the allocation system while
maintaining the principle of performance orientation. In addition, Participants requested
Management for further elaboration of these options and more details on the trade-offs that could
result from their implementation.
Finally, Participants requested Management for a
comprehensive conceptual framework for support to FCSs, linking the consideration for
enhanced support with improving operational effectiveness and maintaining performance
incentives.
2.
This document addresses the requests from Participants at the IDA16 MTR.
Section II elaborates on the challenges that countries are confronted with when breaking cycles
of fragility and violence and the conceptual framework underpinning IDA’s role in helping these
countries overcome such challenges. Section III presents a revised allocation framework
proposed by Management for implementation in IDA17. The implementation of the proposed
framework would, among others, realign IDA's support to the FCSs with the current
understanding of fragility and conflict and would support IDA's agenda for action in this group
of countries while ensuring a meaningful engagement in all countries. Section IV illustrates the
implications of the proposed framework under two indicative scenarios, including the trade-offs
it would give rise to. Section V concludes and presents issues for discussion.
II.
A.
BUILDING LEGITIMATE INSTITUTIONS AND ACHIEVING DEVELOPMENT
PROGRESS IN FCSs: THE ROLE OF IDA
Challenges in Breaking Out of Fragility
3.
Fragility, conflict and violence pose significant development challenges in many
countries around the world. One in four people on the planet, more than 1.5 billion, live in
areas affected by repeated cycles of political and criminal violence.1 Countries affected by
fragility, conflict and violence face political, security, economic and environmental stresses that
cannot be mitigated by their weak institutions.2 As a result, they experience repeated cycles of
1
2
See 2011 World Development Report on Conflict, Security and Development.
The report “Turn Down the Heat” points out that even with current mitigation commitments and pledges fully
implemented, there is a 20 percent likelihood for the world to warm by 4°C above preindustrial levels by 2100.
The impact of climate change will be felt worldwide, but its distribution is likely to be tilted against many of the
world’s poorest regions, with the least economic, institutional and technical capacity to cope and adapt,
including FCSs. The report also points out the likelihood of increased conflict and violence.
-2-
violence and interruptions of development progress. Notably, low-income FCSs lag significantly
behind on progress towards the Millennium Development Goals (MDGs).3 By 2015, it is
expected that 52 percent of the world’s poor will live in FCSs.4
4.
While some countries are stuck in a "fragility trap," other countries have shown
that there is a viable path out of fragility.5 Following periods of conflict and/or severe
political instability, countries like Cambodia, Lao PDR, Mozambique, Rwanda, Uzbekistan and
Vietnam have attained growth rates averaging 4 to 7 percent per annum in transition years.
Economic growth has been accompanied by significant reductions in poverty such as in Vietnam
where the poverty headcount ratio decreased from 64 percent in 1993 to 17 percent in 2008.
Other countries facing similar challenges of fragility provide evidence of development progress.
Ethiopia increased access to improved water from 13 percent of the population in 1990 to 66
percent in 2009-10. Mozambique more than tripled its primary completion rate in just eight
years, from 14 percent in 1999 to 46 percent in 2007. Rwanda cut the prevalence of undernutrition from 56 percent of the population in 1997 to 40 percent in 2005. Nepal received the
MDG Millennium Award in 2010 for significant progress in reducing maternal mortality, which
fell from 770 in 1990 to 170 per 100,000 live births in 2010.6 Bosnia and Herzegovina, between
1995 and 2007, increased measles immunizations from 53 percent to 96 percent for children
aged 12-23 months. This experience, however, is not universal as evidenced by countries that
recently moved out of the FCSs group but have experienced lower economic growth and
relatively slower progress in reforms (e.g., Djibouti, The Gambia and Tajikistan).
5.
How can FCSs break out of fragility and embark on a path to sustainable
development? The central message of the 2011 World Development Report on Conflict,
Security and Development is that it requires strengthening legitimate institutions and governance
to provide citizen security, justice and jobs. The report also points out that the process of
restoring confidence and building institutions requires strong national leadership with support
from international actors to help contain stresses that could derail progress. The literature on
fragility traps provides further evidence on the role that external aid can play in helping countries
moving out from fragility highlighting that the risk of inaction may be greater than the risk of
providing support.
6.
In FCSs, exceptional efforts are needed to restore confidence in collective action
before embarking on wider institutional transformation. Persuading stakeholders to work
collaboratively requires signals of a real break with the past – for example, ending the political or
3
4
5
6
Unless otherwise specified, the term FCSs in this document refers to countries that: (i) have a harmonized
average Country Policy and Institutional Assessment (CPIA) rating of 3.2 or less (or no CPIA); or (ii) have or
have had a UN and/or regional peace-keeping or peace-building mission during the past three years. By this
definition, 31 IDA-eligible countries are considered FCSs in FY13 (see Annex 1), constituting 39 percent of the
number of IDA-eligible countries and 15 percent of their population.
Chandy and Gertz (2011) “Poverty in Numbers: The Changing State of Global Poverty 2005 to 2015.” Note
that the authors use a wider definition of fragility than the World Bank’s list.
A “fragility trap” is defined as a low-level equilibrium with the self-reinforcing features of weak institutions,
low investment, slow growth and the possibility of repeated cycles of violence (see Noro Aina Andrimihaja,
Matthias Cinyabuguma and Shanta Devarajan (Nov 2011), “Avoiding the Fragility Trap in Africa,” World Bank
Africa Region Policy Research Working Paper 5884). This strand of research provides evidence that FCSs not
only grow more slowly than non-FCSs, but that fragility is persistent (the probability that a FCS in 2001 was
still fragile in 2009 was estimated at 0.95). This is consistent with findings from the 2011 WDR which confirm
that essential reforms to “good enough” governance can take 17 to 27 years.
World Bank Staff estimates and “Maternal Health: Where is the Effort (MDGs and Beyond, Issue 2).
-3-
economic exclusion of marginalized groups, corruption, or human rights abuses – as well as
mechanisms to “lock-in” these changes and show that they will not be reversed. In moments of
opportunity or crisis, fast and visible results (such as rapid restoration of essential basic services)
also help restore confidence in the government’s ability to deal with violent threats and
implement institutional and social change.
7.
Exiting fragility is possible but it takes time and sustained efforts to build
functioning institutions. Successful institutional transformation requires a determined national
leadership and sustained efforts. Countries that moved away from fragility and conflict often do
so not through one decisive “make or break” moment – but through many transition moments.
National leaders had to build confidence in the state and to transform institutions over time, as
with the Republic of Korea’s transitions in the security, political, and economic spheres after the
Korean War, or transitions from military rule in Ghana, Chile and Argentina, which included
repeated internal contests over the norms and governance of society. Likewise, periods of
sustained economic and political reform in Vietnam, Lao PDR and Cambodia have led to more
than a decade of peace, prosperity and resilience. A repeated process of building success upon
success enables space for trust, collaborative norms and capacities to develop. For each phase of
progress, national leaders need to build confidence that positive change is possible and deepen
the institutional transformation. A lack of trust and capacity in fragile societies necessitates
sequenced and paced institutional transformation over decades.
8.
The international community has an important role in supporting the long-term
transformation process in FCSs. The 2011 WDR called for the following changes in
international assistance: (i) refocusing assistance on strengthening citizen security, justice and
jobs; (ii) reforming the procedures of international agencies to more effectively respond to the
unique challenges of engaging in FCSs; (iii) recognizing the regional dimensions that generate
stresses causing conflict; and (iv) renewing cooperative efforts among lower-, middle-, and
higher-income countries to share experience and promote "best fit" solutions to the unique
challenges of conflict and fragility. This call for paradigm change was echoed by an expanding
group of self-identified FCSs (the g7+) and donor agencies in their recent endorsement of “The
New Deal for Engagement in Fragile States.” The New Deal challenges the development
community to support peace- and state-building goals that are essential prerequisites for
achieving sustainable poverty reduction and growth and calls for a new approach to delivering
assistance with a strong emphasis on country ownership, strengthening country systems, and
coordinating donor support around a country-led fragility assessment to define a pathway out of
fragility.
B. IDA’s Operational Approaches to Support FCSs
9.
IDA plays a central role in enhancing the effectiveness of development assistance in
FCSs. IDA’s country based business model emphasizes: (i) support for nationally-owned
development strategies; (ii) donor alignment and harmonization; and (iii) mutual accountability
mechanisms for both donors and governments. This model is particularly important in the FCS
contexts, where each country needs to assess its own circumstances and find its own path out of
fragility in light of the different types and combinations of violence, stresses and institutional
challenges they face. In addition, IDA provides a vital platform for coordination among
governments, donors, private sector, academia and civil society organizations (CSOs). By
drawing upon its multi-sectoral perspective and integrative capacity, IDA helps minimize the
-4-
risks and transactions costs associated with the increased complexity of the aid architecture in
FCSs. IDA also generates and shares knowledge on best practices and results across the globe
and supports capacity building and the development of essential systems and institutions for a
more effective delivery of aid and sustainable development. A recent independent survey of
progress towards meeting the commitments of the Paris Declaration on working differently in
FCSs rates the Bank highly in such areas as alignment of aid flows, technical assistance and
capacity building, use of country Public Financial Management (PFM) systems and joint country
analytic work.7
10.
In this context, IDA is committed to continue its efforts to enhance strategic
partnerships with bilateral, multilateral and civil society stakeholders.8 Coordinated action
constitutes a vital aspect of IDA’s engagement in FCSs. In particular, the Bank and the UN are
strongly committed to streamline and enhance their partnership through closer collaboration at
the country level, expanding thematic collaboration, coordinating their support to national
leadership through the New Deal process and addressing implementation challenges. Since 2010
the UN-World Bank Partnership Trust Fund has supported nine joint initiatives in FCSs as well
as exchange of staff to facilitate headquarters support to partnership activities. A joint review of
the partnership is being finalized and will assess progress, identify good practices/lessons learned
and provide recommendations to further deepen the partnership. IDA also continues to build on
partnerships for information exchange, joint analytical work and joint engagement (e.g., country
strategies, operational approaches and implementation arrangements) with Multilateral
Development Banks, the OECD-DAC International Network on Conflict and Fragility (INCAF),
the European Commission and other partners at the regional and country levels. At the country
level, IDA continues its efforts to address – with all relevant stakeholders – issues that may arise
while implementing Multi-Donor Trust Funds (MDTFs).9 Going forward, the partnerships
agenda will remain high in IDA’s priorities for enhancing its operational effectiveness in FCSs.
11.
Over the past few years, the Bank has significantly stepped up efforts to enhance its
development effectiveness in FCSs. Improving results in FCSs is one of the five themes of the
Bank’s Post-Crisis Directions Strategy and a priority of IDA16. Following the launch of the
2011 WDR, which broke new ground in the understanding of fragility and conflict, a strategy for
operationalizing the 2011 WDR findings and lessons was presented to the Executive Directors in
April 2011.10 A broad agenda for change to enhance the Bank’s effectiveness in FCSs was
integrated into the World Bank Group (WBG) modernization agenda and is an important
component of the ongoing change management process within the Bank.11
7
8
9
10
11
See World Bank, 2011, “The World Bank and Aid Effectiveness: Performance to Date and Agenda Ahead”, and
Ishihara, 2012, “Identifying Aid Effectiveness Challenges in Fragile and Conflict-Affected States“ Policy
Research Working Paper 6037, for specific discussion on aid effectiveness issues in FCSs.
Details on recent progress on partnerships can be found in the IDA16 MTR papers “Managing Crisis and
Building Resilience: A Retrospective Review of IDA’s Fifteenth Replenishment,” and “IDA’s support to
Fragile and Conflict-affected Countries.”
MDTFs are a key component of IDA’s engagement in FCSs that have allowed for enhanced flexibility and
timeliness in the provision of financial support to these countries and a broader Bank participation in politically
sensitive contexts and in crises and emergencies.
“Operationalizing the 2011 World Development Report: Conflict, Security and Development,” DC2011-0003,
April 4, 2011.
“Update on the Bank’s Business Modernization: Results, Openness, and Accountability Spring 2012,” DC20120005, April 11, 2012.
-5-
12.
This agenda builds upon a decade of efforts to enhance IDA’s operational
effectiveness in FCSs. Notably, there has been a significant decentralization of Bank staff to the
front lines; increased funding of operational work through the Bank budget; and more flexible
operational procedures.
1. Decentralization. Between FY09-FY11, higher level staff (including both locally and
internationally recruited staff) in FCSs increased by 38 percent. Lending preparation and
supervision is more decentralized in FCSs; the share of headquarter staff time devoted to
the preparation of projects in FCSs decreased from 62 percent to 48 percent between
FY07 and FY11. In addition, regional offices closer to FCSs have played an increasingly
important role in contributing senior staff time to preparing and supervising projects in
FCSs. For example, in the Africa region the staff time contributed by regional offices
(Abidjan, Accra, Addis-Ababa, Dakar and Nairobi) to prepare FCS projects in the region
has increased from 10 percent in FY07 to 17 percent in FY11. In the East Asia and
Pacific region, the staff time contributed by the Sidney office in preparing FCS projects
in the region has increased from 12 percent in FY07 to 32 percent in FY11.
2. Bank Budget. The investment of Bank resources to enhance effectiveness in FCSs has
increased dramatically. The budget per dollar of IDA lending in FCSs has increased by
approximately 20 percent since FY07. In FY11, the Bank spent nearly three times as
much in Bank budget per dollar of IDA lending in FCSs in comparison with non-FCSs.
A significant portion of that difference is explained by higher supervision budgets for
FCS projects (in addition to security costs which are higher in FCSs) to help address
implementation challenges in low capacity environments.12
3. Operational Expediency and Flexibility. The expediency in preparing and disbursing
Bank projects in response to the significant needs in FCSs has increased. The
introduction of Emergency Recovery Loans (ERLs) in line with OP 8.0, which are widely
used across FCSs, has nearly halved the time between project approval and first
disbursement in FCSs. In addition, simpler requirements for project design have also
substantially helped increase the FCSs portfolio disbursement ratio which by FY11 rose
to 25 percent, on par with the rest of the IDA portfolio.
13.
These efforts are showing a positive impact on IDA’s portfolio performance in
FCSs. Ten years ago, FCS projects were twice as likely to fail as those in the rest of the IDA
portfolio. By IDA15, the quality at exit ratings for projects in FCSs improved considerably and
is now on par with the rest of the IDA portfolio.13 While it is difficult to establish a direct link
between these efforts and portfolio performance and whether this trend will be sustained over the
medium term, this outcome suggests that targeted efforts at the project level can have a concrete
impact on results even in these challenging environments. Beyond project ratings, IDA projects
in FCSs have had concrete results on the ground as evidenced in the cases of:

12
13
Afghanistan, where – over the period 2003-2010 – about 22 million people in rural areas
have benefitted from improved infrastructure such as access to water, electricity and
roads through the National Solidarity Program.
This is consistent with recommendations from the Independent Evaluation Group (IEG) on increasing
supervision in fragile states – IEG (2006), “Engaging with Fragile States: An IEG report on World Bank
support to low income countries under stress”.
This outcome reflects the improvement in performance of the FCS investment lending portfolio as well as a
decline in the performance of the non-FCS investment lending portfolio.
-6-




Côte d’Ivoire, where a post-conflict assistance project financed labor intensive public
works, community rehabilitation activities, vocational training and support for selfemployment to reconstruct communities and help reintegrate 18,000 ex-combatants,
individuals associated with an armed group and youth at risk.
The greater lakes region, where as part of a multi-agency effort IDA helped demobilize
and re-integrate over 300,000 ex-combatants in seven countries.14
Liberia, where the IDA-funded Governance and Economic Management Assistance
Program has helped build the basic systems and institutions in the areas of public
financial management, budget preparation and execution, accountability, civil service and
capacity building.
Sierra Leone, where an IDA-financed safety nets program helped 0.7 million people to
gain access to health facilities, 0.4 million children to educational facilities, and over 0.1
million people to markets and other economic infrastructure.
14.
Nevertheless, as highlighted by the 2011 WDR, the slow development progress of
most FCSs calls for a paradigm shift in the way assistance is delivered to these countries.
Country programs need to do more to address the drivers of fragility and conflict together with
client governments and key stakeholders. Stronger partnerships are required to draw on the
comparative advantages of a wider range of international and local actors in addressing the
complex issues of citizen security, justice and jobs – in particular, in light of the regional and
global dimensions of fragility and conflict.15 Furthermore, more operational flexibility and
greater local capacity are needed to respond to the volatility and risk inherent in FCSs contexts.
In this respect, bringing the right staff skills in a sustainable and cost effective model to operate
in these challenging environments remains an important issue for the Bank as well as all
international actors.
15.
In line with the New Deal and the recommendations of the 2011 WDR, the Bank has
embarked on an ambitious agenda to improve its effectiveness in FCSs. An objective
pursued by this agenda is to modernize the Bank’s business model to better respond to the
changing development needs and demands from our client countries. It also aims at better
managing risks in fragile environments and to be more responsive, quicker and flexible in our
engagement in this segment of the client base. This agenda includes: (i) designing integrated
WBG country strategies to better address the drivers of conflict and fragility and build on the
synergies between IDA, IFC and MIGA; (ii) creating more agile operational policies and
associated risk management practices that promote responsiveness and adaptation in low
capacity and high risk environments; (iii) building a stronger community of practice around FCS
issues across regions to encourage learning and the development of "best fit" solutions; (iv)
shifting more resources to the front lines to enhance the extent and depth of client engagement
with appropriately experienced Bank staff in FCSs; and (v) increasing funding to respond to the
peace- and state-building goals of FCSs in addition to their overwhelming development needs.
In July 2011, the Bank established the Global Center for Conflict, Security and Development
(CCSD) in Nairobi to lead the implementation of this agenda and provide additional support to
country teams to address the drivers of fragility and conflict in FCS programs. The CCSD is
14
15
Angola, Burundi, Central African Republic, the DRC, Republic of Congo, Rwanda and Uganda.
As highlighted in the 2011 WDR, the problems in a FCSs are not limited to its borders. Instead, the deaths,
destruction and delayed development due to fragility and conflict have regional and global implications. In that
regard, addressing these problems should involve a coordinated approach by all relevant international players,
including though cross border action .
-7-
working with the g7+ and a wide range of development partners to build a global community of
practice on fragility and conflict.
16.
The five-point FCS reform under the modernization process, summarized below,
reflects the WBG commitment to put the New Deal into practice in its activities.
(i)
Designing integrated WBG country strategies to better address the drivers of conflict and
fragility and build on the synergies between IDA, IFC and MIGA
17.
The Bank is increasingly incorporating fragility analysis in the design of Country
Assistance Strategies (CASs) or Interim Strategy Notes (ISNs) for FCSs. Such analysis
helps the country build institutional foundations for peace and sustainable development. In
Guinea-Bissau, Yemen, the Democratic Republic of Congo (DRC), South Sudan, Niger,
Burundi, Timor-Leste, Papua New Guinea, Somalia and Liberia, the country teams are working
with the support of the CCSD and the Social Development Anchor in preparing fragilitysensitive assistance strategies. Instead of addressing only the investment and capacity deficits,
this new generation of CAS/ISNs explicitly discusses the underlying drivers of fragility and
proposes a combination of financial and technical assistance instruments to help build resilience
(see the examples of Yemen and DRC in Box 1).
Box 1: Formulating Fragility-Sensitive Country Assistance Strategies
Yemen. The Yemen ISN for FY13/14, discussed by the Board in 2012, was prepared following the 2011 crisis
and articulates a new strategy for WBG engagement focused on addressing key drivers of conflict and urgent
transition priorities. As part of the process, in 2012, IDA conducted a Joint Social and Economic Assessment
(JSEA) in coordination with the UN, the European Union (EU) and the Islamic Development Bank (IsDB). The
JSEA analyzed the key social and economic drivers of the 2011 crisis, and identified critical priorities for the
transition period. Its findings directly informed the analysis and key guiding principles of the ISN. Building on
these findings, and drawing on experiences in other FCSs, the IDA team also identified how individual
operations could be adjusted to address specific transition priorities and underlying causes of conflict. In the
areas of public sector governance, in particular, the focus was on supporting institutional transformation and
reform linked to the broader national dialogue process. During the ISN implementation, there will be a specific
focus on enhancing the operational effectiveness of the Bank’s program.
Democratic Republic of Congo (DRC). In recognition of the destabilizing impact of the continuing low
intensity conflicts in the eastern provinces for the country as a whole, the WBG CAS for FY13/16 (currently
being finalized) includes a specific focus on conflict and fragility. In response to the latest crisis in eastern DRC
caused by the M23 rebellion, an assessment was conducted in November 2012 to evaluate the root causes and
drivers of conflict, and identify possible areas of WBG support. This joint diagnostic exercise informed the
development of a multi-sectoral strategy of assistance, articulated as a fourth strategic objective in the CAS,
which integrates a focus on addressing key impediments to peace consolidation and durable economic
development through a selective and strategically targeted program in eastern DRC. Building on the existing
WBG portfolio, the program aims to support government and international partners in strengthening institutional
and societal resilience and addressing the structural determinants of fragility and conflict. In operationalizing
this strategy, IDA will work to maximize the effectiveness and responsiveness of WBG assistance through a
combination of instruments, including the leveraging of existing projects in the current IDA portfolio, the
identification of flexible instruments to drive innovative approaches, and the development of a new economic
community empowerment project.
18.
As illustrated in Box 1, maximizing the impact of the Bank’s support to FCSs
involves deep changes on how country programs are designed. This includes changes on:
-8-





Engagement, with explicit efforts to strengthen multi-stakeholder dialogues in the design
and implementation of IDA projects, creating strong buy-in and ownership from a wider
group of players and potential beneficiaries. This requires more up-front, transparent
public consultation as well as downstream information-sharing about the way resources
are used and the results that are achieved.
Capacity development, with approaches that recognize that supply-driven training and
technical assistance are rarely effective without broader efforts to improve the enabling
conditions that prevent capacity from taking hold and from becoming sustainable. This
means more attention to and adaptability in the implementation process and an approach
to tracking results that recognizes the need to at times focus less on traditional “hard”
outcomes (like number of vaccines) and more on intermediate – and sometimes
incremental – changes in behaviors, coalitions and consensus about the way forward.
Learning and knowledge sharing, with explicit approaches to capture what is working
and under what conditions, sharing knowledge internally and through South-South
mechanisms with other countries facing similar problems. It is important, in this context,
to collect this growing knowledge base (e.g., on institutions, citizen security, genderbased violence, climate change, the regional dimensions of fragility, service delivery,
impact evaluation) and make it available for other countries undertaking similar
transitions, through knowledge hubs and other exchanges. The g7+ represents an
important first step as it represents a group of countries that share their experiences and
strengthen support for promising new ways to tackle problems.
Innovation, with approaches for project design that target the specific circumstances of
FCSs. This is particularly relevant for work on service delivery, where innovative
results-based approaches have been piloted in countries such as Afghanistan and the
Central African Republic.
Monitoring and evaluation, through the adoption of a more integrated approach to the
Bank’s engagement going beyond monitoring the quality and performance of the Bank’s
portfolio in these countries.
19.
Furthermore, the Management teams of IDA, IFC and MIGA are working closely to
fully explore synergies across the three branches of the WBG. Development of the private
sector in FCSs is essential for sustainable employment creation, growth and stability. WBG
management is committed to maximize WBG synergies in FCSs through joint business plans
(JBPs) with a strong private sector focus, aiming to bring together the whole range of WBG
instruments to foster a better investment climate, support private sector development and
employment creation and facilitate catalytic investments and guarantees.16 The joint WBG
teams would focus on primary constraints to private sector growth, in particular access to
infrastructure (including power), access to finance and access to markets. JBPs would be
prepared in countries and sectors where there is adequate government support to private sector
solutions. For these arrangements to succeed, teams would need speed of delivery, a stronger
results focus with shared monitoring and evaluation frameworks, and a focus on transformational
projects. In Burundi, for example, IDA and IFC are already working on a JBP in the
agribusiness sector, building on recent joint work in the investment climate reform area. In
Myanmar, IDA, IFC and MIGA have recently had high level consultations with the government,
civil society and the private sector to identify opportunities to leverage all the WBG tools and
16
As part of its efforts to leverage the private sector, MIGA is proposing to set up the Conflict Affected and
Fragile Economies Facility (CAFEF) to encourage investors through export credit and investment insurance.
-9-
expertise to help rebuild the country, and have agreed to develop JBPs on the power and
financial sectors. JBPs will be prepared in an increasing number of countries where a joint
approach by IBRD/IDA, IFC and MIGA can enhance the delivery of services to our clients,
focusing on specific sectors and actionable targets. Management intends to bring more detailed
proposals on strengthening the WBG’s private sector focus in FCSs to the second IDA
replenishment meeting in June.
20.
The Bank in partnership with other development partners will continue its support
to the g7+ countries. This includes support to help these countries articulate their own fragility
assessments which define strategies for exiting the fragility trap and tracking progress in peace
and state building and in turn influences the priorities of development assistance. Where
country-owned fragility assessments have already advanced, as in Timor-Leste, the Bank has
integrated their assessments into the country strategy document. Such efforts will be expanded
in all New Deal pilot countries.
(ii)
Creating a more agile set of operational policies and associated risk management
practices that promote responsiveness and adaptation in low capacity and high risk
environments
21.
As part of the recent reform of Investment Lending (IL), procedures have been
streamlined for the preparation and implementation of investment operations in FCSs.17
While the current OP 8.0 sets out simplified and expedited procedures for preparing and
implementing investment operations in response to emergencies and crises (referred to as ERLs),
the IL reform extends these exceptional procedures to investment lending in all FCSs in
recognition of the systematic weaknesses in institutional capacity and the need to respond more
quickly and flexibly in FCSs. Specifically, these exceptional procedures aim to:



Expand the applicability of alternative implementation mechanisms (e.g., through UN
agencies, CSOs and Bank execution) to deliver faster assistance to FCSs and take
advantage of partnerships with agencies that might have a stronger presence in the field,
especially in the immediate aftermath of conflict.
Allow for greater use of direct contracting for procurement of goods and services when
required by the context and for higher thresholds for streamlined procurement
procedures.
Shift some of the risk management tools from the project preparation to the project
implementation phase to enable faster processing and recognize the different nature of
risks in FCS contexts. In addition, the IL reform explicitly incorporates an analysis of the
“risks of inaction” into the existing risk framework to recognize the potential long term
costs for countries facing fragility traps.
22.
These reforms set out a differentiated approach to investment lending in FCSs. The
approach recognizes that a “one size fits all” operational framework does not capture the
complexities of working in these environments. In addition, it builds on past experience in
responding to emergencies and crises where the Bank faced similar challenges associated with
urgent needs, weak institutional capacity and high risks. Such an approach will also inform the
17
See “Investment Lending Reform: Modernizing and Consolidating Operational Policies and Procedures,”
November 2012.
-10-
ongoing review of procurement and safeguards policies, which should have a significant impact
on operational flexibility and adaptation in FCSs.
23.
In addition, the Bank is promoting and disseminating solution-oriented operational
practices among staff and management. The Bank is developing a series of pilot cases to
enhance flexibility in the implementation of existing procurement, safeguards application and
financial management guidelines in response to the specific challenges in FCSs. The first pilot is
being implemented in the small states in the Pacific. Their small and isolated economies often
do not allow for complex international competitive processes for the procurement of goods,
works and services. Thus, the region is applying more flexibility to respond to the specific
context, including by: (i) approving direct contracting (when justified), and (ii) approving higher
thresholds for less competitive procurement methods such as shopping and selection based on
consultants qualification. These measures are expected to support speedier contracting and
delivery. Such pilots are being disseminated across FCSs and can serve as the basis for tailoring
the implementation of our fiduciary policies to recognize the specific challenges of other FCSs.
To help drive changes in operational policy and practice to the field level, where problems of
excessive risk aversion can arise, the CCSD has established a senior FCS Implementation
Support Team based in Nairobi with FCS-focused experience and expertise on operations,
monitoring and evaluation, procurement, financial management and safeguards to support and
mentor field-based staff directly in using the full extent of the flexibility offered in existing and
new policies. The FCS Implementation Support Team is also rolling out a specialized course for
operations in FCSs to disseminate a new way of working and to promote exchange of experience
and practice among frontline staff.
(iii) Building a community of practice to encourage cross learning
24.
To ensure that the Bank remains a key contributor to global knowledge on fragility
and conflict, it is carrying out a focused program of research and learning. To create a
worldwide community of practice on the prevention of fragility, conflict and violence, connect
knowledge across contexts and disciplines, and share emerging ideas and innovations to advance
best practices in the field, the Bank has set up the Hive—a knowledge-sharing platform—
connecting practitioners, researchers, policymakers and organizations working on these issues
around the world. It is expected that the platform will strengthen relationships and knowledgesharing between “hard-to-reach” groups like grassroots leaders and local government officials,
and experts working within CSOs, think tanks, and the private sector. Thirty external partners
have signed the Hive Partnership Memorandum of Understanding, and there are ongoing
discussions with 40 other institutions, including UN agencies and departments. Furthermore,
2,479 resources have been added to the ideaMap, the innovative resource center of the Hive. The
current priority is to promote global communities of practices around high-priority topics such as
jobs, security, justice, and natural resource revenue management. For example, the Bank is
expanding its collaboration with the UN on key research, knowledge, learning and policy
initiatives: (i) in the area of economic recovery, the Bank is launching a new platform for
supporting job creation policy development and country level operations; (ii) through its
Program on Forced Displacement, the Bank is strengthening partnerships with key UN entities to
improve predictability of responses for the reintegration of Internally Displaced Persons (IDPs)
and refugees; (iii) in the area of security and justice, the Bank is developing, together with the
UN Department of Peacekeeping Operations (DPKO) and the UN Development Programme
(UNDP), a security sector expenditure review toolkit for the analysis of financial management,
financial oversight and expenditure policy issues in the security sector. In many cases, the
-11-
cultivation of knowledge draws from experience and ongoing operations, as in the 49 ongoing
impact evaluations being undertaken on FCS related issues. An operational research project is
also generating insights on how to build legitimate institutions to provide justice and security
(see Box 2).
25.
Recognizing the need to disseminate analytical tools and operational practices
among Bank staff, the CCSD has launched a Community of Practice for staff and has joint
appointments with the PREM, HDN, SDN and FPD networks to promote staff learning
within these networks. The CCSD is using its central Nairobi location to significantly increase
the number of staff learning events –both, physical and virtual– targeted at field staff in FCSs.
Specially tailored workshops for FCSs are being rolled out in response to conflict and crisis. A
recent week-long training in Dakar brought together task team leaders from Mali, Mauritania,
Niger and Chad to help staff integrate approaches to conflict and fragility in their operations and
across the portfolio. Similar workshops are planned in other regional hotspots. A Bank-wide
core course in fragility and conflict is offered twice a year in headquarters and the field with an
increasing number of external partners participating in it. A new course on FCS operations to
train staff in the revised procedures for developing and implementing FCS operations has been
finalized. Also, the World Bank and IFC are jointly sponsoring an operational learning project
to assess the WBG’s Private Sector Development practices in FCSs in light of the 2011 WDR
and explore what we need to do differently in future operations, analytics and research. Five
topics are being covered: (i) financial institutions and resilience; (ii) firms coping with crime and
violence; (iii) foreign direct investment in FCSs; (iv) entrepreneurship in FCSs; and (v)
investment climate reform in fragile environments.
Box 2: Building Legitimate Institutions for Justice and Security in FCSs: Recent Learning
The 2011 WDR brought justice and security to front and center of the development agenda in FCSs. Arguing
that fragility and violence are fueled by the absence of effective and legitimate institutions to provide basic
security, justice and economic opportunities, the 2011 WDR called for context-specific, “best-fit” approaches to
supporting the development of these institutions.
Through an operational research project on the justice-security-development nexus, the Bank is developing new
analytic and program approaches to strengthen security and justice in FCSs. These involve identifying and
addressing justice and security issues across development sectors, including by improving the provision of
security and justice services; resolving grievances and disputes around the delivery of public services; and
enhancing the fair allocation of rights and entitlements to natural resources and revenue. The program is
designing new methodologies for understanding the social and political context that shape the evolution of
justice and security in FCSs, by analyzing sources of grievance and dispute, the local capacities available to
manage them, and the political economy in which they function. New program modalities are designed not only
to offer financing or technical expertise, but to foster lasting engagements by national leaders, networks and
coalitions that are essential to the development of sustainable and equitable justice and security institutions.
The project is building an evidence base through a small number of pilot projects, including the design of
grievance redress mechanisms for a local governance and service delivery project in South Sudan, participatory
mechanisms for managing natural resource revenue in Liberia, municipal-based crime prevention in Honduras,
and strengthening local courts in Solomon Islands. Yet greater investment is needed to understand and enable
the types of donor engagements that are effective in different contexts. Moreover, the project has highlighted that
attention to justice and security cannot be limited to a project or sector, but should be incorporated across
development programming to enable successful transitions out of conflict and violence.
-12-
(iv) Reforming Human Resources (HR) policies and practices to direct more experienced
Bank staff to serve FCS clients
26.
The Bank recognizes the unique challenges that are faced when working in FCSs
and the need for a differentiated approach in these countries. Thus far, efforts on the HR
front have been focused on attracting internationally recruited staff (IRS) by providing them with
competitive compensation and benefits, career development-related support, and a flexible
transitional toolkit (see Annex 2). Financial benefits exclusive to staff working in FCSs were
approved in FY08, including an Assignment Premium Bonus, a Fragile States Premium, and
Rest and Recuperation benefits. Non-financial incentives, including with respect to professional
development and family support, have also been improved in recognition of the challenges and
risks of working in these environments.18 Finally, there have also been significant efforts
towards mentoring locally recruited staff (LRS) and providing them with opportunities and tools
to develop their skills.
27.
Despite these measures, there remain significant gaps in attracting the right mix of
staff skills in FCSs and in the speed of staff deployment in these countries. To better address
these gaps, management has adopted additional measures as follows:



18
19
Monitor "face time" with FCS clients. Face time is defined as the time of staff based in
FCS country offices, staff based in nearby regional centers, and staff working on FCSs
but travelling from HQ.19 Analysis suggests that face time is an important driver of
portfolio quality. This indicator will be used as a management tool to increase support to
FCSs in a cost effective way.
Enhancing the targeting of HR responses to the challenges of working in FCSs. A better
differentiation of the situations across FCSs - from post-conflict to turnaround and to
continuously fragile countries - will lead to a better use of existing financial incentives
and support mechanisms (e.g., by ensuring that family arrangements such as rest and
recuperation are better aligned with family constraints such as “non-family postings”).
Also, a new package of incentives has been designed to attract locally recruited talents to
undertake cross-country assignments in FCSs. Finally, planning is under way to ensure
that the relevant skills are available to work in different FCS situations. In that context,
the CCSD is leading staff training efforts to broaden the FCS-related skills among staff
and identifying specialized individuals as core resource for surge deployment in cases of
immediate need, while each Region is evaluating its staff working in FCSs and related
skill gaps.
Strengthen incentives to work in FCSs. For internationally-recruited operational staff,
experience working on an FCS country will be a strongly desired skill for promotion to
senior jobs (GH). In addition, each sector will aim at giving staff predictability on the
assignment following an assignment in an FCS (this change will require deeper reforms
in the way careers are managed). Also, further flexibility will be given to managers to
reflect the local labor market conditions to attract scarce skills in FCSs and guidelines
At the time of approval of the financial benefits package for staff working in FCSs the WBG had 653 staff
working in these countries. That number has now reached 868. About half of these staff is deployed in the subSaharan Africa region, 28 percent in the South Asia region and the remaining 23 percent in the Middle East and
North Africa, East Asia and Pacific and Latin America and Caribbean regions.
A face time indicator has been created to monitor the professional support each FCS country receives from the
Bank. This indicator helps Management monitor the variation of face time across countries and ensure that the
Bank’s human resources are deployed effectively.
-13-
will be established to ensure the application of Scarce Skills Premium in a more
systematic manner for LRS in FCSs. In addition, management will work with national
authorities to enable spouses and families of staff serving in non-family duty stations to
be located in a country other than the duty station.
(v)
Enhancing FCSs financing to support sustained institutional reform and reduce poverty
28.
IDA’s reliance on the Performance Based Allocation system is grounded on evidence
that good policies and institutions matter for aid effectiveness.20 Recent analysis has
reaffirmed the relevance of this foundation of the PBA system while adding new dimensions to
the understanding of aid effectiveness in the FCSs context. Research by Andrimihaja et al
(2011) suggests that external assistance targeted to the very sources of fragility and conflict can
play a decisive role in helping countries exit from fragility traps. Research by Denizer et al.
(2011) found that factors beyond the quality of policies and institutions (e.g., in particular
project-level factors such as project design and investment in project implementation and
monitoring) have also a significant positive impact on project performance.21 IDA’s portfolio
performance in recent years provides additional evidence that well designed and proactively
managed projects in FCSs can indeed achieve their expected development results. At the same
time, the 2011 WDR provides useful insights on the nature of fragility and conflict which are
relevant when providing financial support to these countries. First, creating legitimate
institutions that can prevent repeated violence is a protracted process that takes at least a
generation. Second, progress in FCSs should not be measured against a uniform set of
international standards but rather a tailored set of confidence building and institutional
transformation goals specific to the countries. Third, financing should be responsive to the
transition moments that constitute critical opportunities for building coalitions to strengthen
stability and resilience. Section III of this document discusses how these new elements could be
incorporated in IDA’s framework to allocate resources to FCSs.
III.
REVISED ALLOCATION FRAMEWORK FOR FCSs
29.
IDA’s allocation framework for FCSs has evolved over time to support its
operational engagement in these countries. The current allocation framework involves the
application of exceptional regimes for post-conflict (PC) and re-engaging (RE) countries.
Mostly as a result of introducing these regimes, IDA’s financial support to FCSs increased
significantly from US$1.5 billion in IDA11 to US$6.6 billion in IDA15, which has resulted in a
total of US$22.0 billion in IDA commitments over that period. In addition, in recent
replenishments, IDA has provided about US$4.0 billion of additional support to the FCSs in the
form of debt relief, exceptional support for arrears clearance and support in response to natural
disasters and crises.22 At the same time, Multi-Donor Trust Funds (MDTFs) have become an
20
21
22
Burnside, Craig, and David Dollar (2000), "Aid, Policies, and Growth." American Economic Review, 90(4):
847-868. “Selectivity and Performance: IDA’s Country Assessment and Development Effectiveness,” February
2007. “IDA’s Performance Based Allocation and Development Results: An Update,” October 2009. More
recently, an analysis of the Bank’s FPD portfolio found that weak institutions and policies, regardless of income
level, lead to poorer development outcomes (and weaker portfolio results).
Cevdet Denizer, Daniel Kaufmann and Aart Kraay (May 2011), “Good Countries or Good Projects: Macro and
micro correlates of World Bank project performance”, World Bank Policy Research Working Paper 5646.
Annex 4 of the IDA16 MTR document “Progress Report on IDA Support to Fragile and Conflict-affected
Countries” provides details on the support provided by IDA to the FCSs under these modalities.
-14-
important instrument to finance FCSs that has enhanced IDA’s flexibility to provide financial
support, including for countries in arrears.
30.
This section presents a revised allocation framework for FCSs that Management
proposes for implementation in IDA17. Drawing on the initial feedback from Participants at
the IDA16 MTR and consultations with relevant stakeholders, Management has developed a
package of adjustments which will lead to a significant overhaul of the allocation framework for
FCSs.23 The revised allocation framework integrates the evolving thinking on fragility, as
reflected in the 2011 WDR and the New Deal process, and links considerations of enhanced
support with operational effectiveness and maintaining performance incentives. The section is
structured in three sub-sections. Sub-section A discusses the general principles that should
underpin the framework for allocating IDA resources as well as the principles that are specific to
FCSs. Sub-section B presents an analysis of the current allocation framework focusing on the
exceptional allocation regimes for PC and RE countries which, to date, constitute the main
vehicles for IDA’s enhanced support to FCSs. Finally, in light of the discussions in the two
previous sections, sub-section C presents the revised allocation that Management proposes for
implementation in IDA17.
A.
Principles that Should Underpin the IDA Resource Allocation Framework
31.
In assessing the merits of the proposed allocation framework, a number of guiding
principles have been identified. Engagement with FCSs, as a constituency within IDA,
requires that the principles underlying the resource allocation framework adequately support the
achievement of IDA’s over-arching poverty reducing objective while, at the same time,
addressing the specific challenges faced by FCSs.
32.
General principles. The following general principles are being considered:




Effectiveness. Resources should be allocated where they are likely to achieve the largest
impact relative to IDA's poverty reducing objective.
Transparency.
Resources should be allocated based on clear rules that are
understandable by the relevant stakeholders. Clear rules are important to avoid
arbitrariness (actual or perceived) in the allocation process and/or the inclusion of
considerations other than those agreed with stakeholders.
Responsiveness. The resource allocation framework should be able to respond swiftly if
warranted by changes in a country's circumstances.
Adequacy. The resource allocation framework should allow for a meaningful level of
engagement at the country level.
33.
Principles specific to FCSs. Given the unique challenges specific to FCSs, the resource
allocation framework should also rely on the following principles:

23
Timeliness. As highlighted in the 2011 WDR, transition moments in fragile situations
provide unique opportunities for engagement. The allocation framework should be able
to provide timely support to help countries make the most of these opportunities.
The development of the proposed framework benefited from extensive consultations with academia, other
MDBs and think tanks. These included valuable exchanges in the context of the IDA working group on FCSs
and discussions with other MDBs – bilaterally and in the context of the MDB working group on PBA systems.
-15-

B.
Contextual. The FCSs constitute a widely heterogeneous group with each country
confronting unique challenges determined by history, natural resources and many other
factors. This suggests that the allocation framework should incorporate flexibility to
address contextual needs and avoid “one size fits all” solutions.
Current Allocation Framework for FCSs
34.
Current allocation framework.24 FCSs allocations are determined either through the
regular PBA system or an exceptional allocation regime. 25, 26 Under the regular PBA system, the
key factor determining a country’s allocation is its performance as measured by its Country
Policy and Institutional Assessment (CPIA) and its Portfolio Performance Rating (PPR).27 The
allocations to PC and RE countries are determined under exceptional regimes. Such regimes
have been introduced in recognition that these countries face exceptional needs and challenges to
fully rebuild their institutional and policy environment.
Chart 1: IDA’s Resource Allocation Framework 1
(
Exceptional Regimes for PC and RE
Countries
Regular PBA system
Allocated
envelope 2
Country
Needs
Country
Performance
Functional
Form
Grant
discount
(
)
)
(
)
(
(
)
)
Notes:
1/ IDA allocations are based on data for the calendar year immediately preceding the beginning of the fiscal year for which
country allocations are calculated.
2/ The notional envelope allocated under the exceptional regimes is determined each fiscal year. It varies from year to year
depending on the number of eligible countries and their notional country allocations (determined at the time of a country’s access
to exceptional support based on the PCPI-per-capita allocation mapping agreed in IDA14).
3/ CPIAA-C is the average rating of CPIA clusters A to C, which assess macroeconomic and structural policies, and CPIA D is the
rating of CPIA cluster D which assesses governance and public sector management and institutions.
35.
Exceptional allocation regimes for PC and RE countries. The exceptional regimes for
PC and RE countries aim at keeping the performance orientation principle while addressing the
special circumstances faced by these countries. To achieve these objectives, modifications have
been introduced to the allocation formula and the indicators used in the formula relative to the
24
25
26
27
A description of IDA's current resource allocation framework is in Annexes 2 and 3 of the IDA16 MTR
document “Progress Report on IDA Support to Fragile and Conflict-affected Countries.” These annexes
provide details on the regular PBA system and the exceptional allocation regimes for PC and RE countries,
respectively.
Out of the 31 IDA-eligible countries currently considered as FCSs, 3 are inactive, 18 have their allocations
determined under the regular PBA system, 6 are under the exceptional PC regime, 3 are under the exceptional
RE regime and Haiti is receiving exceptional support from the CRW (see Annex 1).
Annex 3 presents the modalities used by other Development Banks to allocate their financial support to FCSs.
For details on the method of calculation of the PPR and its use for allocation purposes see Annex 4.
-16-
regular PBA system (see Chart 1).28 Most notably, under the exceptional allocation regimes: (i)
the quality of a country’s policies and institutions is measured using the Post-Conflict
Performance Indicators (PCPI), a set of indicators specifically tailored to the context of PC and
RE countries;29 (ii) the PPR carries a higher weight in the calculation of the country performance
rating (20 percent as opposed to 8 percent under the regular PBA system); and (iii) the allocation
formula has a greater poverty orientation than the one for the regular PBA system (the country
performance rating has an exponent of 2 as opposed to 5 under the regular PBA system).
36.
The exceptional allocation regimes have proven to be a useful tool for engagement in
PC and RE countries. They have allowed the provision of timely financial support to eligible
countries beyond what would have been provided under the regular PBA system (see Chart 2).30
Such exceptional support has been granted based on clear criteria governing country eligibility,
level of support, duration and the phasing out to the regular PBA system. At the same time, the
framework for exceptional support under these regimes recognizes the need for flexibility in
addressing the complexities and heterogeneity of FCSs (e.g., determining a country’s allocation
for the first year of eligibility under the exceptional windows). 31 Additionally, the exceptional
regimes – as currently designed – present some features that make them attractive relative to
alternative structures (see Box 3).
Box 3: Exceptional Regimes: How Do They Compare to a Set Aside?
The framework for allocating resources under the existing exceptional regimes PC and RE countries presents
several advantages when compared to the alternative of setting aside resources for FCSs during a replenishment
period. In the context of this paper, the most relevant ones are that the exceptional allocation regimes:
 provide for a dynamic framework that has more flexibility than a set aside for responding swiftly to
changing country circumstances (e.g., inclusion of newly eligible countries –as the envelope allocated under
the exceptional regimes is determined on a yearly basis– or changes in country performance –as the yearly
envelope is distributed across countries using indicators lagged by one year at most), in particular in the
context of establishing a link between allocations and country performance;
 minimize the country-level impact of enhanced support to newly eligible countries (the “cost” of increased
support for newly eligible countries is distributed across the entire IDA clientele instead of being exclusively
assumed by the limited number of fragile countries eligible for exceptional support in a set aside); and
 make the overall support under these regimes more resilient to changes in donors’ support due to the link
between the size of the notional envelope and the size of the replenishment.
At the same time, set asides could play an important role in addressing situations where significant needs need to
be addressed in a one-off basis (e.g., crisis response or arrears clearance) or when promoting special
considerations (e.g., regional integration).
37.
Evidence also suggests that the principles, criteria and signals underpinning the
exceptional regimes for PC and RE countries have been a successful tool to identify
stronger performers. Countries that benefited from PC exceptional allocations during the
period FY06 to FY13 had an average yearly increase in their CPIA scores of 0.013 (see Chart 3).
Countries receiving RE allocations experienced average CPIA score increases of 0.07 per year.
28
29
30
31
Annex 5 presents a numerical illustration of how the current exceptional allocation regimes work.
For a detailed description of the PCPI framework see Annex 6.
As seen in Chart 2, the exceptional regimes are estimated to have channeled about 80 percent more resources
than what the eligible countries would have received under the regular PBA system (represented by the curve).
Most recently, this flexibility has been used in the cases of South Sudan and Myanmar (the latest countries to
have been granted access to the exceptional allocation regimes – for PC and RE countries, respectively).
-17-
While these improvements are largely associated with low starting points, the rates of
improvement are much higher than those FCSs that did not receive exceptional allocations (for
which CPIA scores decreased on average by 0.01 per year over the same period of analysis).
Furthermore, countries like Haiti, Liberia, Timor-Leste and Togo – which are/were eligible for
support under these exceptional regimes – experienced improvements larger than most of the
countries that moved out of the FCS group during the same period. While this does not imply
causation, it suggests that – in most of the cases – the exceptional allocations were directed at
strong reformers.
Chart 3: Recent Progress in Policy and
Institutional Reform in FCSs
(FY06 to FY13)
Chart 2: FY13 IDA Allocations to FCSs
10
Re-engaging
countries
Post-conflict
countries
5
FY13 estimated
allocation curve
Other
FCSs
CPIA=3.2
threshold for
fragility definition
0
2.0
2.5
3.0
RE countries,
0.07
0.06
Average CPIA Increase
Per-capita allocation (US$)
0.08
3.5
0.04
0.02
PC countries,
0.01
0
CPIA Rating
Notes:
1/ Excludes countries with allocations determined solely
by the minimum base allocation.
2/ The FY13 allocation curve is estimated based on allocations
under the regular PBA system.
-0.02
Other FCSs, 0.01
Notes:
1/ Figures reflect the average annual change in CPIA
scores over 2004-12.
38.
Nevertheless, the exceptional allocation regimes for PC and RE countries have some
shortcomings vis-à-vis the current understanding of fragility and conflict. These regimes
were structured around the conflict/post conflict paradigm under which countries were assumed
to follow a linear transition from violence to peace (i.e., end of conflict followed by a short postconflict phase leading to peace). Accordingly, the duration of the exceptional support for PC and
RE countries was set in IDA15 at 10 and 5 years, respectively. As shown in the 2011 WDR, the
path out of fragility is often very long and non-linear, with countries experiencing periods of
progress interrupted by cycles of repeated violence and instability. While this was partially
captured in IDA16 by the case-by-case extension of the phasing out periods, the exceptional PC
and RE regimes do not fully address the long term, slow pace, and high risk process of peace and
institution building in a fragile environment. Furthermore, the provision of enhanced support is
limited to countries that have experienced extensive violence (i.e., PC countries) or accumulated
significant arrears (i.e., RE countries). This constrains IDA’s capacity to provide decisive
support to countries that do not fall into these categories but are experiencing openings for policy
and institutional reforms that could help them avoid/exit fragility traps. Yet, the 2011 WDR
shows that cycles of low level violence and/or partial state collapse can have an impact just as
devastating as an all-out war and urges international community to provide quick and decisive
support to help governments and stakeholders make the most of opportunities for reform.
-18-
39.
Finally, as pointed out at the IDA16 MTR discussions, barring any adjustment to
the current allocation framework, the allocations to FCSs would decrease in future
replenishments. Assuming the same replenishment volumes as in IDA16, the total allocations
to FCSs would decline from 14 percent in IDA16 to 12 percent in IDA17. 32 This decline, which
reflects mainly the phasing out from the exceptional allocation regimes to the regular PBA
system, is expected to continue in later replenishments.
C.
Proposed Allocation Framework for IDA17
40.
This section presents the revised allocation framework that Management proposes
for implementation in IDA 17.33 Building on the options presented at the IDA16 MTR and the
feedback received from Participants, the proposed framework would provide enhanced financial
support to FCSs by: (i) providing exceptional support to countries facing “turn-around”
situations; and (ii) increasing the overall poverty-orientation of the regular PBA system. In
addition, the proposed framework includes additional measures which would ensure a
meaningful level of engagement in client countries.
41.
Implementing the proposed framework would lead to a comprehensive overhaul of
the allocation system. Building on IDA's implementation experience and feedback from
Participants at the IDA16 MTR, the revised framework would consolidate the strengths of the
current allocation system while addressing its shortcomings in responding to opportunities
emerging in “turn-around” situations, including but not limited to PC and RE situations. The
new allocation framework would result in increased efficiency, transparency and timeliness in
the provision of IDA support. The specific criteria and parameters guiding the implementation
of the proposed framework will be discussed in the context of second meeting for the IDA17
replenishment. A final decision on such parameters will need to take into consideration several
factors, including trade-offs (which are illustrated in a separate section in this paper on the basis
of two indicative scenarios) and the size of the replenishment.
C.1. Provision of exceptional support to countries facing “turn-around” situations
42.
At the IDA16 MTR, many participants expressed interest in further exploring the
possibility of providing exceptional support to countries undergoing “turn-around”
situations and requested further elaboration of this option. To address this request, this
section elaborates on the analytical underpinnings for the provision of such exceptional support,
which is based on the current thinking on fragility. It also presents the objectives that are
pursued through its provision. In addition, it elaborates on the definition of “turn-around”
situations and the criteria and parameters that could guide the identification of and provision of
exceptional support to countries confronted by “turn around” situations. Finally, it spells out a
decision process that could guide the provision of such exceptional support.
43.
Recent research has added new dimensions to the understanding of aid effectiveness
in the FCSs context. The 2011 WDR presents a framework for moving out of fragility centered
on restoring confidence and transforming institutions. This process, which can take a generation,
32
33
For IDA16, the figure refers to resources allocated through the regular PBA system and exceptional allocations
for PC and RE countries plus the IDA16 Crisis Response Window (CRW) support for Haiti.
The adjustments in this section refer to the modalities for allocating the IDA country allocable envelope. They
do not apply to the allocation of resources under the Regional Operations Window, the Crisis Response
Window or the Systematic Approach to Arrears Clearance, which are dealt with separately.
-19-
involves the seizing of opportunities for change at critical moments. The 2011 WDR emphasizes
that the actions to be taken at such junctures should be nationally led, but also points out the
important role that adequate support from international actors could play in mitigating external
stresses that could derail the process. Recent research also highlights the phenomenon of
fragility traps. This strand of research argues that well-targeted and well-delivered aid can play
an important role in helping countries switch out of fragility traps to a more positive equilibrium
of strengthening of institutions and higher growth.
44.
The main objective of the proposed exceptional regime for “turn around” countries
is to set up a simplified mechanism for the provision of enhanced support in line with the
current understanding of fragility and conflict. Going forward, this new regime would be the
main mechanism to provide enhanced support to countries facing fragility, including new PC and
RE countries. A criticism of the current allocation framework is that it follows a piece-meal
approach for addressing conflict and fragility. This has contributed to the perception of the
current framework as being complex, opaque and prone to arbitrariness. The adjustment
proposed in this section moves away from a discrete treatment of fragility (see Chart 4).34
Instead, it acknowledges that conflict and fragility take many forms along a continuum and that
all of their forms can have a severe human and developmental impact. The proposed exceptional
regime creates a single mechanism that focuses on identifying circumstances that suggest that a
“turn-around” is possible and on modulating the level of assistance along the fragility continuum.
In doing so, the adjustment would enhance IDA’s capacity to provide timely and adequate
support to help countries seize the opportunities presented at critical junctures on their path out
of fragility. Finally, it would give IDA increased flexibility to respond to the longer timeframes
required for restoring confidence and building institutions.
Chart 4: Comparison of Current Exceptional Regimes and the Proposed Exceptional
Regime for “Turn-around” Countries
Current Exceptional Regimes for PC and RE
countries
FCSs
Non-FCSs
Active IDA
countries
Proposed Exceptional Regime for “Turn-Around”
Countries
FCSs
Non-FCSs
Active IDA
countries
TA
countries
RE
countries
RE
countries
PC
countries
PC
countries
Partition based on
3.2 CPIA fragility
definition
Partition based on
3.2 CPIA fragility
definition
Notes:
1/ The shaded regions represent the countries under the current exceptional regimes for PC and RE countries and
those that could benefit from enhanced support under the exceptional regime for “turn-around” countries.
34
Annex 8 compares the framework for exceptional support to "turn-around" countries with the exceptional
regimes for PC and RE countries.
-20-
45.
Relative to the current exceptional regimes for PC and RE countries, the proposed
exceptional regime for “turn-around” countries would: (i) provide IDA with a vehicle for
enhanced support to countries confronted with a “turn-around” situation and are committed to
reform, even if they have not experienced major conflict or accumulated arrears; and (ii) allow
the possibility for IDA to provide enhanced support to countries not formally classified as FCSs
under the current definition of having a CPIA score below 3.2, thus mitigating threshold effects
associated with this definition.
46.
The exceptional regime for “turn-around” situations aims at strengthening the
allocation system on several other fronts:





Effectiveness: by allocating resources to those countries where there is the greatest
potential for impact, as evidenced by improved policies and institutional reform as well
as by progress in portfolio implementation.
Responsiveness: to opportunities for significant policy and institutional reforms.
Transparency: by using streamlined processes.
Build on past experience: in particular, the implementation experience of the exceptional
regimes for PC and RE countries highlights that clearly defined criteria (for eligibility,
duration, graduation and level of support) combined with flexibility are crucial for
channeling enhanced support in a timely manner. It also highlights that the paths out of
fragility can vary significantly from country to country.
Alignment with the New Deal:35 elements currently under development as part of the
New Deal process (e.g., fragility assessments, state- and peace-building indicators) could
be incorporated in the framework laid out in this section.
47.
Definition. Given the complexity of fragility and conflict, a single definition cannot
fully capture all possible aspects of a “turn-around” situation nor would it be desirable. For the
purpose of designing an exceptional regime for countries facing “turn-around” situations, a
“turn-around” situation could be defined as a critical juncture in a country’s development
trajectory marked by: i) the cessation of an ongoing conflict (e.g., interstate warfare, civil war or
other cycles of violence and/or partial state collapse that significantly disrupt a country's
development prospects); or ii) the commitment to a major change in the policy environment
either following a prolonged period of disengagement from Bank lending (i.e., re-engaging
countries) or a major shift in a country’s policy priorities.36
48.
Eligibility. The methodology for identifying countries eligible for exceptional “turnaround” support could use principles, criteria and signals similar to those that have made the
exceptional allocation regimes for PC and RE countries successful tools for selective
engagement. Countries requesting exceptional “turn-around” support could be deemed eligible
through a two filter approach:

35
36
Filter 1. This filter aims at limiting access to exceptional support to countries where
there is evidence that conflict and/or collapse of the state has had a significant impact on
See Annex 7 for details on the New Deal and the status of the Peace and State Building Indicators.
The 2011 WDR defines “transition moments” as events that make new efforts to prevent or recover from
violence possible. These can involve space for deep and wide-ranging change (e.g., the end of a war, a deep
national crisis) or more limited change (e.g., a new governmental reform plan, negotiations or coalition-building
between different actors in society). The proposal for providing exceptional support to “turn-around” countries
would aim, albeit not exclusively, at events falling in the former category rather than in the latter one.
-21-
the country’s institutional and policy framework as assessed under the PCPI framework
and, where relevant, evidence of conflict intensity. Countries with a PCPI score greater
than a pre-established level (e.g., 5.5 of a range from 1 to 6) could be, in principle,
ineligible for exceptional “turn-around” support.37 Use of the PCPI, which is currently
used to assess only PC and RE countries, would provide a common metrics for measuring
the quality of policies and institutions for all “turn-around” countries.

Filter 2. This filter aims at establishing evidence that potential candidates are: (i) facing
a “turn-around” event (defined in paragraph 47); and (ii) committed to take the steps
necessary to make the most out of that situation (e.g., avoid conflict, identify and address
the drivers of fragility and conflict). This filter could be modeled based on Operational
Policy 2.30 and other criteria currently used under the exceptional regimes for PC and RE
countries. Specifically, under filter 2, evidence would need to be provided of:
a. a reasonable expectation of continued stability;
b. an effective counterpart for the Bank;
c. strong international support for a strong and inclusive national plan for
turnaround/transition and the potential for a well-defined role for the Bank;38, 39 and
d. satisfactory early performance as demonstrated, for example, by strong country
portfolio performance or by the country having taken convincing steps towards
social and economic recovery.40
For countries emerging from conflict, it would be expected that active conflict has
diminished sufficiently to allow implementation of IDA-supported activities, including
by a reasonable expectation of a formal cease-fire.41
Credible signals for these conditions could be identified, among others, through
assessments performed by Bank country teams, the CPIA and PCPI exercises, the
tracking of peace-building and state-building indicators being developed under the New
Deal, country-led fragility assessments, and in transitions results frameworks and
compacts signed onto by government and development partners.
37
38
39
40
41
As pointed out in Annex 6, the latest round of revision of the PCPI framework established a more explicit link
between CPIA and PCPI whereby there is a broad correspondence between PCPI scores of 5.0‐6.0 and CPIA
scores of 3.0‐3.5. This relationship, however, should be understood as indicative only, given that the contents
of the two sets of criteria do not fully overlap.
Support from the international community could be demonstrated through donor conferences, alignment of a
Post-Conflict Needs Assessment (PCNA) to the national plan and/or New Deal compacts.
An inclusive national transition plan would reflect a nationally owned process of widespread consultation,
through national dialogues, stakeholder consultation and an inclusive political process – “a country led
assessment involving key national stakeholders and non-state actors on the causes and features of fragility and
sources of resilience….” (New Deal document).
This criterion, however, would need to be applied flexibly as it may preclude/limit the provision of enhanced
financial support to post-conflict countries (where portfolio implementation has been disrupted by the conflict),
inactive countries (where there is no active portfolio) or other countries with poor portfolio implementation
where reforms undertaken in “turn-around” situations could lead to a qualitative change in project
implementation.
Examples of conflict reduction could include a reduction in the actual incidence of violence (measured in
violent deaths, including battle deaths, civilian deaths and/or violence by non-state actors, or destruction),
demonstrable and voluntary returns of displaced persons or other efforts to avoid violence, including truth
and/or reconciliation campaigns, signing of ceasefire or other peace agreements, security sector reforms and
commitment to demobilization, disarmament and reintegration programs.
-22-
49.
Duration/Exit. Paths out of conflict and fragility vary significantly by country,
suggesting that not all countries will follow a similar transition period. Thus, the exceptional
allocations for “turn around” countries would not involve a pre-established “phase-out” period.
Rather, because the exceptional “turn-around” allocations would be intended to provide support
for a national plan associated with a particular transition moment, their length could be set years
from the outset for the duration of the national plan (2 to 3 years). At the end of the period
covered by the national plan, and if the transition process is successful (as demonstrated through
tracking of the PCPI, indicators associated with peace-building and state-building goals and
other indicators) the country could potentially re-apply for further exceptional financing.
Decisions on renewed enhanced support would be case-by-case based on the two filter eligibility
framework and the decision making process described below. Countries that have not
demonstrated progress in their transition (as evidenced, for example, by stagnant or decreasing
PCPI scores or other indicators) would not be eligible to re-apply for exceptional support until
conditions change and a new fragility assessment is undertaken.
50.
The possibility of re-application, rather than pre-established “phase-out” periods,
would increase IDA’s flexibility to respond to changing conditions in FCSs, including
through the adequate calibration of allocation levels. Furthermore, flexible timing would
allow alignment of the exceptional “turn-around” support to national strategic planning,
including Transition Results Frameworks associated with Post-Conflict/Post-Disaster Needs
Assessments (PCNAs/PDNAs) or Joint Assessment Missions (JAMs), Poverty Reduction
Strategies (PRSs) or CASs/ISNs. Finally, relative to the current exceptional regimes for PC and
RE countries, a re-application process would allow for a quicker return to the regular PBA
system if countries cannot demonstrate progress in their transition process.
51.
Resource allocation process. Building on IDA’s implementation experience, the
proposed allocation process could be streamlined while preserving positive features of the
exceptional regimes for PC and RE countries (discussed in Box 3) and enhancing the role of the
PPR in allocation decisions. In that regard, the exceptional allocations under the “turn-around”
regime could be determined for new entrants as part of the yearly allocation exercise.42 Country
allocations under the new exceptional regime would be equal to the eligible country’s per-capita
allocation times its population. Several aspects are noteworthy:

42
43
A country’s per capita allocation levels would be determined by Management (see
paragraph below on the possible decision process) based on a matrix of notional
maximum per capita allocations linked to PCPI and PPR levels that would be agreed with
the Deputies in the course of the replenishment discussions.43 Section III of this paper
Following the practice under the PC and RE regimes, there could be flexibility to include newly eligible
countries between two annual allocation exercises. Allowing for this flexibility would lead to increased
volatility in IDA allocations for all IDA-eligible countries. The increased volatility, however, would be limited
as the “cost” for enhanced financing to newly eligible countries would be distributed among all IDA clients the
fiscal year following the determination of eligibility.
The heterogeneity of FCSs situations and the various types of turn-around situations they could be confronted to
suggest that the determination of per-capita country allocations cannot rely solely on the use of such a matrix
and that there should be room for qualitative judgment to consider country-specific circumstances, including the
level and duration of the exceptional support already provided by IDA. In general, however, it would be
expected that – subject to absorption capacity considerations – only countries with the greatest needs (e.g., postconflict countries) will have per-capita allocations close to the notional maximum levels set up in the matrix.
Per-capita allocations for all other countries should normally be lower (a rule of thumb could be for per-capita
-23-



illustrates the impact and trade-offs associated with this proposal under two indicative
scenarios for the notional maximum per-capita allocations, namely: i) levels twice the
current ones for the exceptional regime for post-conflict countries (as per the scenario
presented in the IDA16 MTR paper), and ii) levels 50 percent higher than the ones under
the current ones for the exceptional regime for post-conflict countries.
Including the PPR in the matrix of notional maximum per-capita allocations would be a
new feature relative to the current exceptional regimes. It reflects recent experience
showing that, with adequate government commitment and IDA support, portfolio
performance in FCSs can improve. It will capitalize on recent improvement in portfolio
performance (as well as improvements that could result from implementing the Bank's
modernization agenda for FCSs) and enhance the incentives for portfolio performance.
As illustrated in Annex 8, this process would greatly simplify the calculation of
exceptional allocations relative to the current exceptional regimes for PC and RE
countries and enhance the transparency of the allocation system.
Finally, under the exceptional regime for “turn-around” support, country allocations
could be revised as part of the re-application process (see paragraphs 49 and 50). This
feature would allow for modulating the level of exceptional support to ensure a timely
and smooth transition to the regular PBA system (by factoring in, among others, the level
and duration of the exceptional support already provided to a country).
52.
Given the acute need for resources that some countries could experience during the
initial response to a “turn-around” situation, higher allocations could be considered during
the first year of eligibility for exceptional support. Such decision, however, would be
warranted by special circumstances (e.g., in cases where the conflict has been extremely
destructive, but where the government’s capacity to implement a comprehensive recovery
program has remained strong).
53.
Decision process. The framework for exceptional support to “turn-around” countries
should involve a transparent and robust decision making process. The decision process could
follow a two-stage approach, similar to that for the allocation of exceptional support under the
CRW. Specifically:

Step 1. Bank Management would inform IDA’s Executive Directors of its intention to
grant eligibility to a country shortly after a “turn-around” situation. Bank Management
would assess the adequacy of providing “turn-around” support to a country based on:
o An analysis by Bank staff.
The analysis would need to demonstrate that providing exceptional “turn-around”
support to a country is in line with the regime’s stated objectives and eligibility
criteria. In particular, it would need to demonstrate that the country is confronted
to a “turn-around” situation, provide evidence of the country’s commitment to
reform and outline the consultations undertaken with other international partners,
as appropriate. It would also need to demonstrate the compatibility of providing
the exceptional support with other Bank policies, procedures and other
requirements applicable to the beneficiary country (e.g., those applicable to
countries emerging from conflict, to re-engagement in inactive countries).
Finally, the analysis would need to propose, and substantiate, the parameters for
allocations to countries in this category to be around half the maximum notional levels, as per current practice
under the exceptional regime for RE countries).
-24-

the provision of exceptional support (as per the framework agreed with the
Deputies) and the indicators –as well as guideposts– that would be used to
monitor the country’s progress in its transition.
o The beneficiary country agreeing to and commencing implementation of a reform
program endorsed by the Bank.
Step 2. The Executive Directors would be informed of a country eligibility decision as
part of CAS/ISN discussions or at the next operation for the country.
54.
Chart 5 provides an indicative illustration of how the process for the provision of
exceptional support for “turn-around” countries would work.
55.
The exceptional “turn-around” regime would address all future cases of enhanced
IDA support; there are, however, 9 countries with allocations currently determined under
the exceptional PC and RE regimes.44 It will be important to ensure that these countries have a
smooth transition from these regimes to the regular PBA system or, if warranted, to the proposed
exceptional regime for “turn-around” support. Several considerations are relevant when
addressing this issue. These include: (i) preserving the integrity of the new exceptional “turnaround” regime; (ii) alignment of treatment vis-à-vis the upcoming cases for enhanced support
(the treatment of which would be addressed under the exceptional “turn-around” regime); and
(iii) aligning incentives to support these countries’ progress out of fragility and conflict.45, 46 In
light of the above, it would be important to create space for these countries to align themselves
with the eligibility criteria of the exceptional “turn-around” regime with due process and at an
appropriate pace. This would be achieved by implementing two interim measures: (i) a case-bycase extension of the phasing out period for the duration of IDA17; 47 and (ii) align the level of
support to these countries with the support that would be provided to countries under the
exceptional “turn-around” regime. The exceptional PC and RE regimes would be discontinued
by the end of IDA17 with exceptional regime for "turn-around" countries remaining as the only
vehicle for enhanced IDA support thereafter.
44
45
46
47
Afghanistan, Burundi, Central African Republic, Côte d’Ivoire, DRC, Liberia, Myanmar, Togo and South
Sudan. With the exception of Côte d’Ivoire, Liberia, Myanmar and South Sudan, all of the above countries are
scheduled to return to the regular PBA system at the end of IDA16 as they reach the end of the agreed phase out
periods. Côte d’Ivoire and Liberia would be in a similar situation at the end of IDA17.
In particular, it will be important to avoid creating undue pressure on countries to align themselves with the
elements underpinning the exceptional regime for “turn-around” support (e.g., countries could privilege speed at
the expense of due process and quality in the preparation of fragility assessments).
At the same time, the allocation framework should have incentives for these countries to move to the new more comprehensive - framework for "turn-around" countries (if warranted by these countries' meeting the
eligibility requirements). In this regard, the fact that - for most of these countries - the IDA17 years would be
the last ones in their phasing out period would lead to allocation levels lower than what they could receive
should they qualify for exceptional "turn-around" support, thus aligning the financial incentives with supporting
an eventual shift towards a more comprehensive treatment of fragility.
This case by case extension of the phasing out period could be based on the criteria agreed in IDA16, namely:
(i) limited economic status and financing options, measured by GNI per-capita lower than the IDA operational
cutoff or lack of access to IBRD financing; (ii) presence of clear factors slowing down the transition, most
notably a resurgence or continuation of conflict in parts of the country, measured by the presence of UN
Security Council mandates for peace-keeping forces (with the exclusion of border monitoring missions); and
(iii) PPR, averaged over the last three years, of at least 3.0. Decision rule was: the phase out period is extended
if the country meets (i) and at least one among (ii) or (iii).
-25-
Chart 5: Possible Process for the Provision of Exceptional “Turn-around” Support
Process
Comments
Management assesses adequacy of providing
“turn-around” support based on:
 An analysis performed by staff demonstrating
that providing exceptional “turn-around”
support is in line with the window’s objectives
and eligibility criteria.
 The country agreement to and commencing
implementation of a reform program endorsed
by the Bank.
The terms of exceptional “turn-around” support
will follow the rules agreed with donors in the
context of the replenishment discussions.
 The country's progress in its transition will be
monitored based on indicators and guideposts
detailed in the staff analysis prepared at the
eligibility stage.
 A country's re-application will be based on a
new fragility assessment.
-26-
C.2. Increasing the poverty-orientation of the regular PBA system
56.
At the IDA16 MTR several participants expressed interest in increasing the poverty
orientation of the regular PBA system and requested further elaboration of this option.
This section elaborates on the objectives of this element of the Management proposal, its
analytical underpinnings and the different modalities that could be followed to increase the
poverty orientation of the allocation system with their pros and cons.
57.
Increasing the poverty orientation of the regular PBA system, while not based
exclusively on considerations of fragility, will allow for an increased IDA engagement in the
broader group of FCSs. This is a response to the increase in the number of IDA countries with
Gross National Income (GNI) per-capita levels above the IDA operational cutoff and the
increased revenue dispersion among IDA countries (see Chart 6). In general, countries with high
GNI per-capita are receiving more support –on a per capita basis– than the other IDA countries
as they tend to have stronger performance (see Chart 7) and have access to other financing
options (included as blend IBRD-IDA countries), reflecting their improved economic
circumstances. In that context, a stronger poverty orientation of the IDA allocation system while retaining the underlying performance-driven framework- may be warranted. The high
concentration of FCSs at the lower end of the income scale means that any increase in the
poverty orientation of the IDA allocation framework would direct more resources to most FCSs.
It should be noted, however, that this measure would also result in a redistribution of resources
within non-FCSs as illustrated in the section on implications and trade-offs.
Chart 6: Recent Evolution of GNI Percapita in IDA-only Countries
Chart 7: Estimated IDA16 Per-capita
Allocations by Income Groups
45.0
(Per-capita Allocation in US$)
4,000
3,500
GNI per capita
3,000
IDA operational cutoff
2,500
2,000
1,500
30.0
15.0
0.0
1,000
GNI pc twice GNI pc above
GNI pc
GNI pc below Low GNI pc
or more
1,200
between 600
600
FCSs
operational
and 1,200
cutoff
Other IDA countries by tercile
500
0
Jan-00
Jan-03
Jan-06
Jan-09
Jan-12
Notes:
1/ Figures reflect the income distribution for IDA-eligible countries at
the mid-point of a replenishment period. The shaded box represents the
inter-quartile interval. Solid lines connect the minimum and maximum
values to the boxes.
Country groups by income level
Notes:
1/ Exclude India and Pakistan (for which IDA allocations are capped),
inactive countries and countries under the small islands exception.
2/ Countries in the categories of low GNI pc FCSs and GNI per-capita
levels twice or more the operational cutoff exclude FCSs.
58.
In order to increase the poverty-orientation of the allocation system, Management
proposes to reduce the CPR. Chart 8 below shows the simulated impact on IDA allocations in
overall allocation terms of changing the CPR exponent to different levels. The impact is
presented in terms of the shifting of resources to FCSs (which would translate in a reduction of
resources for non-FCSs) and the overall performance orientation of the allocation system (as
measured by the CPR).48 As expected, the lower the CPR exponent (i.e., the higher the poverty
orientation of the system), the higher the shift in resources at the expense of a lower performance
48
The distributional impact within the non-FCS group is discussed in the section on implications and trade-offs.
-27-
orientation. All other things equal, reducing the CPR exponent from its current level of 5 to 4
would provide close to US$0.6 billion to FCSs while maintaining a fairly strong performance
orientation in the allocation system. Lower levels for the CPR exponent would lead to higher
shifts in resources to FCSs associated with a larger impact on the performance orientation in the
allocation system.
59.
Increasing the poverty-orientation of the regular PBA system could create concerns
regarding the effectiveness in the use of IDA resources. These concerns would be related to
the shifting of limited IDA resources from countries with stronger performance (as measured by
the CPR) to those with lower performance, in particular to FCSs. As pointed out earlier in this
document, however, recent empirical evidence, supported by the improvement in project
performance in FCSs, suggests that there is room for reassessing the weight of the different
elements in the allocation formula without necessarily having a negative impact on the overall
performance of the IDA portfolio.49 Much would depend on the Bank’s continued progress in
strengthening operational effectiveness and the envisaged further shift in the substance and
modes of delivery of Bank assistance to FCSs.50 Furthermore, the reduction of the CPR
exponent would provide larger relative incentives for performance improvement over time for
countries at the lower end of the performance spectrum — most of which are FCSs with low per
capita support from IDA. Details on alternative approaches to enhance the poverty orientation of
the allocation system are provided in Box 4.
Chart 8: Impact of Modifying the CPR Exponent in the Allocation Formula
Increased Allocations to FCSs during IDA17
Performance Orientation of the Allocation System
8.0
35
CPR 5
Per capita allocation (US$)
Allocation (US$ billion)
30
6.0
4.0
2.0
CPR 4
CPR 3
25
CPR 2
20
15
10
5
0.0
5
4
3
CPR exponent
2
0
Q5
Q4
Q3
Q2
Performance Quintile
Q1
Notes:
1/ The performance orientation of the allocation system is illustrated in terms of per-capita allocation by
performance quintile (as per CPR scores). Q5 is the top quintile and Q1 is the lowest quintile.
49
50
Recent empirical analysis showed the importance of project-level factors (e.g., project design and investment in
project implementation and monitoring) on project outcomes (“Good Countries or Good Projects? Macro and
Micro Correlates of World Bank Project Performance” by C. Denizer, D. Kaufmann and A. Kraay, 2011). The
recent evolution in IDA’s portfolio in FCSs supports these findings (as detailed in Section II above). Also, the
research on "fragility traps" provides evidence that the productivity of aid in African FCSs is higher than that in
non-FCS if that aid is used to help these countries escape the fragility trap.
This agenda for action has been reflected in the Bank strategy, Operationalizing the 2011 World Development
Report, and further enhanced in the Bank’s recent Modernization Paper. As pointed out in Section II, this
agenda includes more flexible staffing for FCSs programs to support clients on the ground, more flexible
operational processes to better adapt to FCS contexts, and a more integrated World Bank Group approach to
enhance employment and private sector development in FCSs.
-28-
Box 4: Options for Increasing the Poverty Orientation of the Allocation System
The current allocation formula provides two options for increasing the poverty orientation of the allocation system: (i)
reducing the CPR exponent (Option 1);1 or (ii) reducing the GNI per-capita exponent (Option 2). Staff simulations
indicate that, on balance, Option 1 is superior to Option 2 as it provides a better balance between increasing financial
support to FCSs, maintaining the performance orientation in the system, reducing volatility and limiting the impact at the
country level. Below are the details of the assessment.
 Redirecting resources to poorer countries. Both options redirect resources to poorer countries (see Chart 1). This
redirecting is unambiguous under Option 2, less so under Option 1. In particular, Option 1 could lead to reduced
allocation for some poor countries with strong performance.
60%
40%
40%
Change in per-capita allocation
Change in per-capita allocation
Chart 1. Impact on per-capita allocations by income level
60%
20%
0%
-20%
-40%
-60%

0%
-20%
-40%
-60%
0.0

20%
1.0
2.0
3.0
GNI per-capita (US$ thousands)
4.0
0.0
1.0
2.0
3.0
GNI per-capita (US$ thousands)
4.0
Volatility of allocations. Option 1 reduces allocation volatility as it reduces the impact of CPR fluctuations. On the
other hand, Option 2 increases allocation volatility as it amplifies the impact of GNI per-capita fluctuations.
Incentives. Both options lead to an overall reduction in the performance orientation but increase performance
incentives for low CPR countries. Under Option 2, however, the reduction in performance orientation is larger and
the increased performance incentives reach fewer countries than under Option 1 (see Chart 2 below).
Chart 2: Performance orientation of the allocation system
25.0
Option 2
Option 1
Changing CPR exponent:
Per-capita allocation
region for increased incentives
20.0
15.0
10.0
Changing GNI per-capita
exponent:
region for increased
incentives
5.0
0.0
1.0
1.5
2.0
2.5
3.0
3.5
CPR score
CPR exponent 5

CPR exponent 4
GNI exponent
Impact at country level. Under Option 1, more countries benefit from allocation increases at the expense of fewer
countries. In addition, under Option 1, countries benefiting (affected) from an allocation increase (reduction) tend to
have low (high) allocations (see Chart 3). Also, changes in country allocations have a smaller dispersion under Option
1 (changes in per-capita allocations range from -16 percent to +43 percent under Option 1 and from -46 percent to +42
percent under Option 2). Thus, relative to Option 2, Option 1 benefits more countries at the expense of fewer
countries and at a lower relative cost for affected countries.
60%
40%
40%
Change per-capita allocation
Change per-capita allocation
Chart 3. Impact on country allocations
60%
20%
0%
-20%
-40%
0%
-20%
-40%
-60%
-60%
0.0
1
20%
10.0
20.0
30.0
Per-capita allocation
40.0
50.0
0.0
10.0
20.0
30.0
Per-capita allocation
40.0
50.0
Reducing the CPR exponent would also lead to a greater role of a country’s population in determining its allocation. See paragraph 63 for further details.
-29-
C.3. Ensuring a Meaningful Engagement in all Countries
60.
A key principle underpinning the allocation system is that it should allow for a
meaningful level of engagement at the country level. This section discusses additional
measures aimed at achieving that objective that would also simplify the allocation system and
lead to increased allocations for several FCSs
Increase of Minimum Base Allocation
61.
As part of the current allocation system, IDA allocates a minimum of SDR3 million
per year to each country irrespective of its performance –the so called minimum base
allocation.51 The minimum base allocation constitutes the bulk of IDA’s support for several
small states, a number of which are FCSs.52 As shown in Table 1, the minimum base allocation
represents on average 2.4 percent of IDA’s allocable envelope during IDA16. However, the
minimum base allocation represents more than half the IDA allocations to the small states during
the same period. The dependence on the base allocation is even greater for the small states in the
FCSs group. For these countries, the base allocation represents an average of more than 70
percent of their indicative IDA16 allocation. This is because about half of the small states in the
FCSs group have their IDA16 allocations comprised entirely of the minimum base allocation.
Table 1: Base Allocation as a Share of IDA16 Allocation
All countries
Non- Small States
Small States
FCS
Non-FCS
Base allocation
(share of total IDA allocation)
2.4%
1.7%
51.9%
71.7%
46.4%
Memorandum item
FCS
. Non - FCS
7.0%
1.8%
Notes:
Figures based on the indicative allocation for the IDA16 period reflecting the FY2013 list of fragile situations.
62.
The current minimum base allocation remains insufficient to support an effective
country program in small states.53 Despite the doubling of the minimum base allocation
51
52
53
Countries with allocations fully determined by the minimum base allocation can effectively receive less than
this amount if they are grant beneficiaries as the grant portion of the their allocation is subject to the volume
reduction agreed with donors in the context of the grant allocation framework.
Twenty-three IDA-eligible countries are considered small states (http://go.worldbank.org/QLCDU7B8T0). This
is equivalent to slightly less than 30 percent of the total number of IDA-eligible countries. Most of these
countries are in the Pacific (9 countries), Africa (6 countries) and the Caribbean (5 countries). This group of
countries differs greatly in terms of size, per-capita incomes and vulnerabilities. Eight of them are considered
FCSs (Comoros, Guinea-Bissau, Kiribati, the Republic of Marshall Islands, the Federated States of Micronesia,
Solomon Islands, Timor-Leste and Tuvalu).
Small states are confronted by an array of challenges that limit their development prospects even when domestic
policies are reasonable. This can be illustrated by the IDA-eligible Pacific Island countries, which are among
the smallest, most remote and geographically fragmented in the world. While a number of these countries have
relatively high GNI per-capita levels, they share most of the challenges of lower income countries. They
typically have limited economic diversification, high infrastructure costs, a limited skill base, and weak
institutions. Furthermore, they are: highly vulnerable to natural disasters (it is estimated that, on average,
-30-
agreed with donors in the context of IDA16 (and the already high levels of per-capita support to
these countries), it is the view of Management that the current minimum base allocation remains
insufficient to support an effective country program, in particular in those small states whose
IDA allocations are entirely determined by the minimum base allocation. Based on available
unit cost estimates for IDA countries (see Table 2), the current base allocation can only fund 11
kilometers of two-lane paved road, 5 km of rail road or 2,250 kilowatt of electricity generation.
It is important to note that the unit cost figures in the table likely underestimate the costs
confronted by small states which typically face higher infrastructure and service delivery costs,
reflecting – among others – the higher costs of climate resilient development.
Table 2: Infrastructure Unit Costs Estimates
Unit Cost 1/
(US$)
What the base
allocation can buy
Sector
Unit
Electricity
Per kilowatt of generation capacity
2,000
2,250 kilowatt
Roads
Per kilometer of two lane paved road
410,000
11 kilometers
Railway
Per kilometer of rail
900,000
5 kilometers
Mainlines
Per line 2/ 3/
127-580
7,760 mainlines
Mobile
Per suscriber 2/ 3/
127-451
9,980 mobile lines
Notes:
1/ Source Yepes “Investment Needs for Infrastructure in Developing Countries 2008–15,” (2008).
2/ Estimated unit cost varies by region.
3/ Figures for mainlines and mobile lines estimated based on upper bound for unit cost.
63.
It should be noted that –in addition to increasing the performance orientation of the
allocation system– lowering the CPR exponent would also lead to an increased role of
population in determining a country’s regular PBA allocation. This could result in
reductions in the per-capita IDA allocation to countries with a smaller population to the benefit
of those with a larger one. An increase in the minimum base allocation would protect an
expanded segment of IDA’s clientele against this negative effect.
64.
In light of the above, Management proposes to increase the minimum base
allocation from its current level of SDR3 million per year. Increasing the minimum base
allocation would have a significant impact for small states by ensuring a minimum "lifeline"
without significantly impacting the overall performance orientation of the system or significantly
changing the allocations for other countries.54 With 81 IDA-eligible countries, an increase of the
minimum base allocation by SDR1 million per year would only result in additional SDR243
million (equivalent to less than 1 percent of the IDA16 replenishment) being allocated outside of
the regular allocation formula.
54
natural disasters cost these countries 1 percent of GDP per year - and much more in some countries), isolated
from major markets and severely challenged by environmental stresses. These countries also tend to rely
heavily on external assistance for the provision of even the most basic services and on external trade and foreign
investment to overcome their scale and resource limitations, all of which increases their vulnerability to external
economic and environmental shocks.
Staff estimates indicate that a SDR1 million increase in the minimum base allocation would lead to an average
increase in IDA’s allocation to small states by 20 percent, with some countries experiencing increases higher
than 30 percent. This would be achieved at a relatively small cost for other IDA clients (less than 1 percent
reduction in the allocation to the most affected countries).
-31-
Elimination of MDRI Netting Out
65.
As pointed out at the IDA16 MTR, implementation experience has shown that the
MDRI netting out with 30 percent capping still negatively affects IDA’s operational
engagement in many countries. The adverse impact is most pronounced in the FCSs and SubSaharan African countries that receive relatively low IDA allocations through the PBA regular
system. This negative impact is projected to worsen overtime, while the net benefit continues to
be concentrated in a few IDA countries that already receive relatively large allocations. In
addition, the MDRI netting out has the unintended consequence of reducing the performance
incentives in the PBA for some MDRI recipients. Finally, the current mechanism has introduced
additional complexity in the PBA system in contrast to Deputies’ objectives with regard to
simplifying the PBA system and enhancing its transparency.
66.
During the IDA16 MTR, several Participants requested that the issue of eliminating
the remaining MDRI netting out be considered further during the IDA17 replenishment
discussions. Many Participants acknowledged that the new mechanism still had negative
consequences and that concerns of moral hazard for debt management were mitigated by the
current PBA system and conditionality associated with the HIPC Initiative process. Some also
noted that eliminating the netting out can be regarded as an element to improve the financing
support to FCSs, while others questioned whether eliminating the MDRI netting out completely
would undermine the equity of treatment principle and raise moral hazard concerns.
67.
The elimination of the MDRI netting out would benefit many FCSs and simplify the
transparency of the allocation system. In light of the spirit of the proposed package (which
also aims at simplifying the resource allocation framework), consideration could be given to
eliminate MDRI netting out. Therefore, if included in the package of measures to adjust and
simplify the allocation framework for IDA17, the elimination of the MDRI netting out would
further strengthen the support for FCSs and enhance the transparency of the allocation system.
C.4. Management Proposed Allocation Framework for IDA17
68.
In summary, Management proposes to adopt a revised allocation framework for
IDA17. The proposed framework builds on earlier analysis presented at the IDA16 MTR,
feedback from stakeholders and further analysis presented in this paper. Collectively,
implementing the proposed elements of this framework would result in an allocation system that
responds to the principle of effectiveness in a way that: (i) preserves the principle of performance
orientation; (ii) builds on IDA’s implementation experience, including the need for striking a
balance between rules and judgment; (iii) reflects the new understanding on fragility and
conflict; and (iv) responds to the challenges and opportunities presented by the new landscape in
IDA’s client base. This would allow for swift IDA response to windows of opportunity in FCSs
if warranted by country context. Finally, implementing the proposed framework would ensure
that IDA is able to maintain meaningful country engagement.
69.
Specifically, the proposed framework consists of the following components:
i.
setting up a comprehensive regime for exceptional support to countries facing “turnaround” situations. Starting from IDA17, this new framework will be used for all
new cases calling for exceptional financial support from IDA;
-32-
ii.
iii.
increasing the poverty-orientation of the regular PBA system by reducing the CPR
exponent; and
increasing the minimum base allocation.
70.
If the MDRI netting out were to be eliminated as part of this set of measures, it would
help further strengthen the support for FCSs and simplify the allocation framework.
71.
The decision on how much (i.e., the specific criteria and parameters) to increase the
financial support to FCSs would need to take into account several factors. Key among these
are the size of the replenishment and the different trade-offs that would arise through the
implementation of the new framework. The latter are illustrated in the section below under two
indicative scenarios. Given the above, Management will seek a decision on the specific criteria
and parameters guiding the implementation of the proposed framework in the context of second
meeting of the IDA17 replenishment as part of the discussion of the “ask” and financing
scenarios.
IV.
IMPLICATIONS AND TRADE-OFFS
72.
This section illustrates the potential impact of implementing the proposed
framework. The illustrative figures in this section reflect a number of assumptions (see Annex
9); most notably, it is assumed that the IDA17 replenishment volume is the same as in IDA16
and that transitional support is provided to India in an amount equal to two-thirds of its IDA16
capped allocation. These figures will need to be updated as the key parameters of the
replenishment –including those guiding the implementation of the proposed framework– are
agreed upon. The potential impact of the package is illustrated in terms of increased financial
support to FCSs and associated trade-offs under two indicative scenarios. These indicative
scenarios differ, among others, in terms of the assumed level of exceptional support to “turnaround” countries.55 Specifically:


55
56
Scenario 1 assumes a level of support to “turn-around” countries double the notional percapita levels agreed for PC countries in the context of IDA14 (i.e., a maximum per-capita
allocation of US$34.0). It also assumes that: (i) the CPR exponent is reduced from 5 to
4; (ii) the minimum base allocation is increased from SDR3 million per year to SDR4
million per year; and (iii) interim measures for the current PC and RE countries are
implemented during IDA17 as per the framework described in paragraph 55.56
Scenario 2 differs from Scenario 1 in that it assumes a level of support to “turn-around”
countries 50 percent higher than the notional per-capita levels agreed for PC countries in
the context of IDA14 (i.e., a maximum per-capita allocation of US$25.5). All other
assumptions remain the same as for Scenario 1.
The estimates for exceptional “turn-around” support in this section are based on the working assumption that
about a quarter of the IDA-only FCSs with GNI per-capita below the IDA operational cutoff (not currently
under the PC or RE regimes) would qualify for such exceptional support. These estimates should be considered
as highly preliminary, in particular given that (subject to meeting requirements and following the decision
process detailed in the previous section) some countries currently under the exceptional PC and RE regimes and
some non-FCSs could become eligible for exceptional “turn-around” support.
As a working assumption it is assumed that all of the current PC and RE countries which are scheduled to exit
these regimes by the end of IDA16 have their phase out period extended for the duration of IDA17. It should be
noted, however, that – if implemented – such a decision will be case-by-case.
-33-
73.
The implementation of the proposed framework could lead to a significant increase
in IDA’s financial support to FCSs.57 Implementing the proposed framework under Scenario 1
would lead to a 76 percent increase in IDA’s financial support to FCSs during IDA17 relative to
what these countries would receive under the current allocation framework (see Chart 10). As a
result, when compared to the current system, IDA’s allocation to FCSs during IDA17 would
increase: from US$4.7 billion to US$8.3 billion; from 12 percent of the IDA allocable envelope
to 21 percent; and from US$12 per capita to US$21 (see Table 3). Under Scenario 2, IDA’s
allocations to FCSs in IDA17 would reach US$7.2 billion, equivalent to 18 percent of the
allocable envelope or US$18 in per capita terms.
Chart 9: Impact of Implementing the Proposed Package
Total IDA Allocations to FCSs
Breakdown of the impact by measure
4.0
9.0
0.1
3.0
3.0
2.4
5.4
4.7
4.7
(US$ billion)
(US$ billion)
3.6
6.0
0.1
2.3
2.0
1.4
1.0
0.6
0.6
0.6
0.4
0.0
0.0
IDA16
Current system
IDA 17
Scenario 1
Potential scale up
IDA 17
Scenario 2
Scenario 1
Other measures
Increased poverty orientation
Scenario 2
Interim measures
Exceptional "turn-around" support
74.
Most of the estimated allocation increase for FCSs during IDA17 would accrue to
countries currently under the exceptional PC regime. These countries are estimated to
account for about 66 percent of the total allocation increase to FCCs under Scenarios 1 and 2.58
This reflects the combined impact of the assumed implementation of the interim measures
targeting this group of countries and the increase (actual and assumed) in the number of
countries eligible under this regime during IDA16. It is important to point out, however, that
these figures should be considered as very tentative since several of the countries currently under
the exceptional PC regime could exit it and be among the first beneficiaries of exceptional
support under the “turn-around” regime.59 It should also be noted that, given the temporary
nature of these interim measures, the share of IDA support provided through both of the current
exceptional regimes, for PC and RE countries, will decline over time while that under the
exceptional regime for “turn-around” countries will become the sole instrument for channeling
IDA’s exceptional support to FCSs starting in IDA18.
57
58
59
The figures in this section reflect only the implications of implementing the proposed package in terms of IDA
allocations. Implementing the proposed package will also have implications in terms of Bank budget. In
particular, there could be a further shift of budget resources for project supervision and/or non-lending support
from non-FCSs to FCSs with a related increase in security costs.
As pointed out in paragraph 37, these countries – as a group – are among the FCSs that have experienced the
fastest progress in recent years on policy and institutional reform.
Four out of the seven New Deal pilot countries are countries that are benefiting from allocations under the
exceptional PC regime. These countries could, depending on progress and meeting the eligibility requirements,
have access to exceptional “turn-around” support.
-34-
Table 3: IDA17: Impact of the Proposed Package
Allocation Share of IDA Per-capita
1/
envelope
allocation
(US$ billion)
(percent)
(US$)
Allocation
1/
(US$ billion)
Share of
Per-capita
IDA
allocation
envelope
(percent)
(US$)
Current System
Non-FCSs
FCSs
Post-conflict
Re-engaging
Other FCSs
Total
35.2
88.2
15.4
4.7
2.2
0.7
1.7
11.8
5.6
1.8
4.4
11.7
11.4
8.7
14.6
39.9
100.0
Scenario 1 2/
Non-FCSs
FCSs
Post-conflict
Re-engaging
Other FCSs
31.6
8.3
4.6
1.3
2.4
79.2
20.8
11.6
3.3
6.0
Total
39.9
100.0
Change relative to Current System2/
13.8
20.6
23.5
15.7
15.8
Scenario 2 2/
32.8
7.2
3.9
1.1
2.2
39.9
Non-FCSs
FCSs
Post-conflict
Re-engaging
Other FCSs
Total
82.1
17.9
9.6
2.7
5.6
100.0
-3.6
3.6
2.4
0.6
0.6
-9.0
9.0
6.0
1.5
1.6
-1.6
8.9
12.1
7.0
1.2
Change relative to Current System2/
14.3
17.7
19.6
13.1
15.7
-2.4
2.4
1.6
0.4
0.5
-6.1
6.1
4.0
0.9
1.2
-1.1
6.0
8.2
4.4
1.1
Relative change
(percent)
-10.2
76.3
105.8
80.6
36.7
Relative change
(percent)
-6.9
51.8
71.3
50.5
27.2
Memorandum item:
Percent increase in allocations
Post-conflict
Re-engaging
Other FCSs
Small States
Current System
Scenario 1
Increase
Scenario 2
Increase
3/
Scenario 1 2/
66.1
16.1
17.8
Allocation
(US$ billion)
0.6
0.7
0.1
0.7
0.1
Share of IDA
envelope
(percent)
1.6
1.7
0.2
1.7
0.2
Scenario 2 2/
65.7
14.9
19.4
Per-capita
allocation
(US$)
49.9
54.9
5.0
55.9
6.0
Notes:
1/ Figures exclude transitional support for India.
2/ As a working assumption, exceptional support for “turn-around” countries is assumed to be delivered to countries that are not currently under
the exceptional PC and RE regimes.
3/ Reflects the share of the increase in allocations (and in the proportion of the IDA envelope) to FCSs that would accrue to each FCSs category.
75.
Implementing the proposed framework would also involve significant trade-offs that
need to be considered when deciding the criteria and parameters of implementation. All
other things equal, increasing IDA’s support to FCSs would lead to a dollar for dollar reduction
in IDA’s support to non-FCSs. This shift in resources (US$3.6 billion under Scenario 1 and
US$2.4 billion under Scenario 2) would mean a reduction of IDA’s program (in some cases
significant ones) in countries with strong policies and institutions, some of which are among the
poorest and most vulnerable in IDA’s client base. Nevertheless, it should be noted that the shift
-35-
in resources represents a much larger percent increase for FCSs, as a group, than it does as a
percentage decrease for non-FCSs.60
76.
Implementing the proposed framework would also involve redistributions within
the non-FCS group. These redistributions reflect the fact that some of the components in the
framework are not based exclusively on fragility considerations. In particular, increasing the
poverty-orientation of the allocation system would direct resources from non-FCSs with stronger
performance (as measured by the CPR) to those with weaker performance, which would slightly
reduce the overall performance orientation in the allocation system. Nevertheless, as pointed out
in paragraph 80, the allocation system would still preserve the principle of performance
orientation.
77.
It is important to note, however, that – depending on criteria and parameters – the
flow of resources under the proposed framework would go in the “right” direction (see
Chart 1). The results under the indicative scenarios show that, on average, resources would go:




from non-FCSs with relatively higher per-capita allocations to FCSs (most of which have
low per-capita allocations) and non-FCSs with relatively lower per-capita allocations.
from countries with relatively higher levels of human development (as per the Human
Development Index – HDI) to those with lower levels of human development.
from countries with a relatively lower risk to have their economic development progress
disrupted by natural disasters or external shocks (as measured by the Economic
Vulnerability Index – EVI) to countries where this risk is relatively higher.
in a way that enhances IDA’s capacity to support a meaningful program in all countries,
with only a small reduction in the level of resources allocated on the basis of performance
considerations.
78.
Potential trade-offs at the regional level will also arise but are expected to be
manageable. Implementing the framework under the indicative scenarios would lead to an
increase in the share of IDA resources to the Africa and Latin America and the Caribbean
Regions (see Table 4 and Chart 12). For the Africa Region, the increase would range between
0.7 percentage points under Scenario 2 and 1.0 percentage points under Scenario 1. For the
Latin America and the Caribbean region, the increase would be of about 0.6 percentage points.
The larger range of the increase for the Africa region reflects that most of the countries currently
under the exceptional regimes for PC and RE countries are in this region. With the exception of
the Middle East and North Africa region, estimates for the other regions show reductions in their
share of IDA resources ranging from slightly above 1 percentage point for the East Asia and
Pacific region to less than 0.1 percentage points for the Europe and Central Asia region.
79.
The application of the proposed framework would retain the principle of
performance orientation in the allocation system. As illustrated in Chart 13, the application
of the proposed framework would continue to channel more resources to better performers (as
measured by the CPR), albeit with smaller differences among all performance quintiles (see
Table 5). In particular, application of the current framework during IDA17 would result in
allocating 5.2 times more resources, in per-capita terms, to countries in the top performance
quintile than to those in the lowest quintile. Under Scenario 1, countries in the top performance
60
Under Scenario 1, the estimated 76 percent increase in allocations to FCSs would entail a 10 percent decrease in
allocations to non-FCSs. Under Scenario 2, the estimated 52 percent increase for FCSs would lead to a 7
percent decrease in allocation to non-FCSs.
-36-
quintile would benefit from per-capita allocations 2.1 times more than countries in the lowest
quintile. Under Scenario 2, the ratio would be 2.6. It should be noted that the ratios under
Scenarios 1 and 2 would be broadly in line with those observed for IDA14 and IDA15 (2.3 and
2.7, respectively).61 It is also important to point out that, under any of the indicative scenarios,
countries in the top 3 performance quintiles would – on average – continue to receive about 90
percent of the per-capita allocations they would receive under the current system.
Chart 10: Impact of the Proposed Package on Per-capita Allocations
(across different dimensions)
FCS vs. non-FCS 1/
By Level of Human Development
Per capita allocation as share of per capita
allocation under current system
Scenario 1: FCSs
150%
Scenario 2: FCSs
100%
Scenario 2: non-FCSs
Scenario 1: non-FCSs
50%
Per capita Allocaiton as a share of per capita
allocaiton under current system
200%
200%
150%
Scenario 1
Scenario 2
100%
50%
0%
0%
0
10
20
30
40
Per capita allocation under current system
50
0.2
0.3
0.4
0.5
0.6
Human Development Index (HDI)
0.7
0.8
Per capita allocations as a share of per capita
allocation under current system
By Level of Economic Vulnerability
200%
150%
Scenario 1
Scenario 2
100%
50%
0%
0
20
40
60
Economic Vulnerability Index
80
100
Notes:
1/ Figures for Scenarios 1 and 2 assume, as a working assumption, that exceptional “turn-around” support is
provided to countries in the two lowest CPR quintiles proportionally to their population.
2/ Excludes small states to minimize distortions on per-capita allocation figures.
61
See “IDA’s Performance Based Allocation System: Review fo the Current System and Key Issues for IDA16,”
May 2010. This ratio is estimated to have reached about 5 in IDA16 as a number of countries exited the
exceptional PC and RE regimes while the countries remaining under these regimes progressed in their phasing
out towards the regular PBA system.
-37-
Table 4: IDA17: Impact of the Proposed
Package on Allocations at Regional Level
Africa
East Asia Pacific
Europe and Central Asia
Latin America and the Caribbean
Middle East and North Africa
South Asia
Chart 11: Impact of the Proposed Package
on Per-capita Allocations
(regional level)
Baseline
Scenario 1
Scenario 2
57.6
14.6
3.0
2.0
1.0
21.8
58.7
13.5
2.9
2.6
1.1
21.3
58.4
13.5
3.0
2.6
1.1
21.4
-2.0
-1.0
(percentage points)
0.0
1.0
2.0
AFR
LAC
MENA
ECA
Notes:
1/ Figures assume, as a working assumption, that exceptional
“turn-around” support is provided to countries in the two lowest
CPR quintiles proportionally to their population.
2/ Excludes transitional support for India.
SAR
EAP
Scenario 1
Scenario 2
Notes:
1/ Figures for Scenarios 1 and 2 assume, as a working
assumption, that exceptional “turn-around” support is
provided to countries in the two lowest CPR quintiles
proportionally to their population.
2/ Excludes transitional support for India.
Chart 12: The Proposed Package: Impact on the Overall Performance Orientation of the
Allocation System during IDA17
60
Current system
IDA17 per-capita allocation (US$)
50
Scenario 2
40
Scenario 1
30
20
10
0
Q5
Q4
Q3
Q2
Q1
CPR Quintile
Notes:
1/ Figures for Scenarios 1 and 2 assume, as a working assumption, that exceptional “turn-around” support is
provided to countries in the two lowest CPR quintiles proportionally to their population.
2/ Does not include Pakistan due to the capping of its allocation.
3/ Excludes transitional support for India
Table 5: The Proposed Package: Impact on the Overall Performance Orientation of the
Allocation System by Performance Quintile
Baseline
per-capita allocation
(times the
(US$)
lowest
quintile)
Quintile 5 (Top)
Quintile 4
Quintile 3
Quintile 2
Quintile 1 (Lowest)
53
42
28
21
10
5.2
4.1
2.7
2.1
1.0
Notes:
1/ Excludes transitional support for India.
Scenario 1
per-capita allocation
(times the
(share of
(US$)
lowest
baseline)
quintile)
46
37
25
24
22
2.1
1.7
1.1
1.1
1.0
86.7
88.5
89.9
113.1
213.0
Scenario 2
per-capita allocation
(times the
(share of
(US$)
lowest
baseline)
quintile)
48
39
26
24
18
2.6
2.1
1.4
1.3
1.0
90.1
92.1
93.6
113.6
181.2
-38-
V.
CONCLUSION AND ISSUES FOR DISCUSSION
80.
IDA has made significant progress to enhance its operational effectiveness in FCSs.
These efforts are beginning to show a positive impact on FCSs’ portfolio performance,
evidenced by the improvement in quality ratings for FCSs projects in IDA15. The slow progress
of most FCSs on their path out of fragility and conflict, however, calls for a further shift in the
way IDA delivers its assistance to these countries. In response, the Bank has committed to an
ambitious agenda for change in line with the 2011 WDR and the New Deal process. This agenda
includes: (i) designing integrated WBG country strategies to better address the drivers of conflict
and fragility and build on the synergies between IDA, IFC and MIGA; (ii) creating more agile
operational policies and associated practices that promote responsiveness, adaptation and
learning in low capacity and high risk environments; (iii) building a strong community of
practice around FCSs’ issues across regions; (iv) shifting more resources to the front lines to
enhance the extent and depth of client engagement with experienced Bank staff in FCSs, and (v)
increasing funding to respond to the peace- and state-building goals of FCSs in addition to their
overwhelming development needs. Over the past year, much progress has been achieved as
detailed in the document and Management is committed to maintain the momentum of change.
81.
Regarding the allocation of IDA resources, Management has presented a
comprehensive framework for allocating resources in IDA17. Implementing this framework
would result in an allocation system that responds to the principle of effectiveness in a way that:
(i) preserves the principle of performance orientation of the allocation system, (ii) builds on
IDA’s implementation experience, (iii) reflects the new understanding on fragility and conflict,
and (iv) responds to the challenges and opportunities presented by IDA’s diverse client base.
This would allow for swift IDA response to windows of opportunity in FCSs if warranted by the
country context. In addition, the proposed framework includes measures that would reduce the
volatility of IDA allocations and simplify the allocation process while ensuring that IDA is able
to maintain meaningful engagement in all IDA-eligible countries. Implementation of this
framework would represent a significant re-alignment of IDA’s financial support to FCSs with
the opportunities presented by the New Deal.
82.
The decision on how much (i.e., the specific criteria and parameters) to increase the
financial support to FCSs through the proposed framework would need to take into
account several factors. Key among these are the size of the replenishment and the different
trade-offs that would arise through the implementation of the package. Management will seek a
decision on the specific criteria and parameters guiding the implementation of the proposed
framework in the context of second meeting of the IDA17 replenishment as part of the
discussion of the “ask” and financing scenarios.
83.
Staff would welcome the Deputies’ views on:
a. The Bank’s efforts to improve its operational effectiveness in FCSs.
b. The revised allocation framework proposed by Management for implementation
in IDA17.
c. The illustrative trade-offs related to the implementation of the proposed
framework.
-39-
Annex 1: IDA-eligible Countries, FY13
Region
Africa
East Asia and Pacific
Europe and Central Asia
Latin America and the
Caribbean
Middle East and North
Africa
South Asia
All regions
Number of countries
40
15
8
9
2
8
82
o/w:
FCSs
18
7
2
1
1
2
31
Post-conflict 1/
5
0
0
0
0
1
6
Re-engaging 2/
2
Other FCSs
11
1
6
0
2
0
1
0
1
0
1
3
22
List of countries 3/ Angola
Liberia
Cambodia
Armenia
Bolivia
Djibouti
Afghanistan
Benin
M adagascar
Kiribati
Bosnia and Herzegovina
Dominica
Yemen, Republic of
Bangladesh
Burkina Faso
M alawi
Lao PDR
Georgia
Grenada
Bhutan
Burundi
M ali
M arshall Islands
Kosovo
Guyana
India
Cameroon
M auritania
M icronesia, FS
Kyrgyz Republic
Haiti 4/
M aldives
Cape Verde
M ozambique
M ongolia
M oldova
Honduras
Nepal
Central African Republic
Niger
Myanmar
Tajikistan
Nicaragua
Pakistan
Chad
Nigeria
Papua New Guinea
Uzbekistan
Sri Lanka
Comoros
Rwanda
Samoa
Congo, DR
São Tomé and Príncipe
Solomon Islands
St. Lucia
St. Vincent and the
Grenadines
Congo, Republic of
Senegal
Timor-Leste
Côte d'Ivoire
Sierra Leone
Tuvalu
Eritrea
Somalia
Tonga
Ethiopia
S outh S udan
Vanuatu
Gambia, The
Sudan
Vietnam
Ghana
Tanzania
Guinea
Togo
Guinea-Bissau
Uganda
Kenya
Zambia
Lesotho
Zimbabwe
Notes:
1/ Countries currently benefitting from allocations under the exceptional regime for post-conflict countries.
2/ Countries currently benefitting from allocations under the exceptional regime for re-engaging countries.
3/ Countries shaded in gray are the IDA-eligible countries considered FCSs as per the definition provided in footnote 1 in the main body of this document. Countries
currently under the exceptional allocations regimes for PC and RE countries are in bold and underlined.
4/ IDA’s support to Haiti during IDA16 is provided through the Crisis Response Window.
-40-
Annex 2: WBG Existing Support to Staff Working in FCSs
1. Financial Incentives - Overseas Benefits:
a. FCS Assignment-Premium Bonus: payable only in FCSs; paid in lump sum at end
of assignment, calculated at the rate of 15 percent of the market reference point
for grade GG at the time of payment, for each year in the host duty station;
prorated for partial years of assignment.
b. Fragile States Premium. Payable only in FCSs; percentage applied to market
reference point for grade GG; may be equal to 10 percent of GG Market
Reference Points (MRP) given for FCSs considered marginal, and 20 percent of
GG MRP for FCS considered core.
c. Hazard Pay (includes selective non-FCS locations). US$1,365 per month payable
to staff at host duty stations considered hazardous locations as determined by UN.
d. Rest and Recuperation (“R&R”) (includes selective non-FCS locations).
Provided for specified FCSs as determined by management every 42 to 90 days;
benefit equals to 10 leave days with pay plus cash value of full economy roundtrip
fare from host duty station to HQ.
e. Hardship differential (all countries). Percentage applied to market reference point
for grade GG; based on UN overall hardship rating defined for each host duty
station; may be equal to 0, 8, 15, 20, or 25 percent.
f. Expand utilization of LRS talent through cross country assignments (CCA) and
Localization Plus (L+) Recruitment. CCA and L+ enhanced packages costs
include relocation benefits and are payable for period between two and five years.
2. Career Development: Professional Growth for Staff on Field Assignments in FCSs:
a. Strengthened re-entry process and career counseling for Country Managers.
b. Assignment length for FCSs: 2 years (with option to renew).
c. Increased utilization of multi-year Term Appointments (4-5 years with additional
years as needed).
d. Corporate Reassignments - Talent Forum organized by Operations/Network
Directors to ensure assignments for FCS staff one year prior to return to HQ; and
match GF-GH staff to vacancies on a semi-annual basis with the support and
agreement of Regional Vice-Presidents.
e. Dedicated engagement to recruit and help fill FCS vacancies.
f. Priority placement of FCS Staff - Automatic Short-listing for the first three
positions at the same level to which current and recently returned FCS assignees
apply.
g. Batch recruitment for all Country Management positions.
h. Country Management Positions posted at levels GH.
i. Mandatory Management Training.
j. FCS experience as one of the indicated criteria for promotion for Grade Levels
GH and above.
3. Additional support
a. HR FCS Focal Points/SWAT Team - FCS Focal Points in HR Teams to
consistently move forward the FCS agenda.
-41-
b. HR Business Partners follow-up and monitoring in place with dedicated mobility
teams in regions.
c. Increased Administrative leave to 10 days (only for those serving in FCS).
d. HR FCS Community of Practice - Institutional mechanism to move FCS agenda
forward and to ensure support to staff.
e. Non-Family Duty Station Exceptions for Spouse/Partner (includes selective nonFCS locations)
f. Support for spouse careers.
-42-
Annex 3: Allocation of Concessional Resources to FCSs
African Development Fund
The African Development Fund (AfDF) allocates financial support to eligible FCSs through
2 key mechanisms:


The regular PBA system, which is the AfDF’s core resource allocation mechanism.
Under this system, resources are allocated to all AfDF-eligible countries on the basis of
performance and needs.
The Fragile States Facility (FSF), a set aside established in 2008 to provide additional
resources for sustained and differentiated support to FCSs.
The AfDF PBA system operates broadly along the same lines as the IDA PBA system.62
Under this system resources are allocated to countries based on their needs and performance.
The system includes a cap on country allocations (set at 10 percent of the PBA allocable
envelope), a minimum allocation set at UA5 million per replenishment cycle and a discounts
applicable to the grant portion of the allocated resources (up to 20 percent) to the overall
allocation to blend AfDB/AfDF countries (50 percent). As part of the 13th AfDF replenishment
discussions, options are being explored to modernize and improve the AfDF PBA system. 63 The
options under consideration include possible modifications aiming at strengthening the system in
response to the challenges confronted by FCSs. The options being considered in this area are: i)
the use of a partially differentiated CPIA for FCSs that would include elements to assess their
performance in dealing with the sources of fragility,64 and ii) incorporating measures of state
fragility in the PBA formula complementing the current measures of needs.
The FSF, is structured in three financing windows:65



Pillar I. Supplemental Support. Resources from this window augment an eligible
country’s regular PBA allocation.
Pillar II. Arrears Clearance. This window provides resources to help eligible countries
clear their arrears in the context of the Heavily Indebted Poor Countries (HIPC) Initiative
and the MDRI.
Pillar III. Targeted support. This window provides financing for capacity-building and
technical assistance to eligible countries.
Support under Pillar I is provided for two replenishment cycles, subject to funding. The
resource allocation under this pillar is linked to the regular PBA system. During the AfDF 12th
replenishment, the available resources were allocated to eligible countries based on the average
of the country’s two highest PBA allocations in the 11th replenishment cycle, multiplied by a top62
63
64
65
For a detailed description of the AfDF’s PBA system and the full set of options for modernization and
improvement under consideration see “Options for a More robust ADF Performance-Based Allocation
System,” February 2013.
Several of the options under consideration were also evaluated by IDA as part of the IDA16 MTR discussions.
The IDA16 MTR paper on IDA’s support to FCS provides IDA’s assessment of the options considered.
Similar to the approach currently used by IDA under the exceptional PC and RE regimes (i.e., use of PCPI
instead of CPIA), which would be extended under the proposed exceptional “turn-around” regime.
For a detailed discussion of the FSF, including eligibility requirements, resource allocation modalities under
the different windows and the options under consideration for their modification, see the AfDB paper “Review
of the Bank Group Engagement in Fragile States,” February 2013.
-43-
up factor of 2. The resulting figures were subject to a floor of Unit of Account (UA) 10 million
and a ceiling of UA60 million. As part of the AfDF’s 12th, a phasing-out framework was
introduced based on three criteria, namely: a harmonized CPIA rating of 3.3 or more (which
would lead to a 10 percent discount in the allocation); gross national income per capita of
US$500 or more (which would lead to an additional 20 percent discount); and a period of six
years or more of enhanced support that FSF beneficiaries have received from the AfDB Group
(which would lead to an additional 20 percent discount).
As part of the AfDF’s 13th replenishment discussions, options are being considered to
modify the rules governing the allocation of resources under Pillar I. The changes under
consideration aim at addressing identified shortcomings, including the capacity of the facility to
respond to changing country circumstances and emerging needs during a replenishment cycle,
and enhance its capacity to address the challenges confronted in dealing with FCSs. The changes
include possible revision to the eligibility criteria as well as to the resource allocation framework
and phasing out modalities.
Asian Development Fund
The Asian Development Fund (ADF) allocates financial support to FCSs through two key
mechanisms:


The regular PBA system, which is the ADF’s core resource allocation mechanism. The
system links ADF’s allocations to country performance, as determined by a country
performance assessment.
Exceptional support for post-conflict and re-engaging countries, which has been
established in recognition of the need for flexibility in a post-conflict setting.
The ADF’s PBA system operates in a way similar to that of IDA. The allocation formula,
however, is a multiplicative function of the country performance rating, per capita income and
population (as opposed to the additive form used by IDA). It should also be noted that the
population exponent in this functional form is 0.6, which results in a small-country bias (i.e.,
smaller countries will have larger per capita allocations, all else being equal).66 The ADF PBA
system incorporates, among others, a 14 percent soft cap on allocations to blend ADB/ADF
borrowers and a 20 percent volume discount on the resources provided in grant form (the volume
discount is not applicable to countries in post-conflict status).
The ADF began providing exceptional allocations to post-conflict and re-engaging
countries in 2002. Over time, the provision of such exceptional support has been aligned with
that of IDA in terms of country eligibility and phasing out from the exceptional allocation levels.
Exceptional post-conflict and re-engaging support has been provided to Afghanistan, Myanmar,
Solomon Islands, Sri Lanka, Tajikistan and Timor-Leste. Below are the details for the most
recent cases.

66
Afghanistan. The provision of exceptional support started in 2002 with a disaster relief
program. During the ADF X replenishment (2009-2012), ADF donors agreed that the
This feature, however, does not allow some small Pacific countries to be allocated resources considered
sufficient for a meaningful ADF support. To address this, a set aside for Pacific Countries has been established
(equivalent to 4.5 of the resources allocable through the PBA formula). The resources from this set aside are
distributed among eligible countries using the regular PBA formula.
-44-


provision of such exceptional support be harmonized with that of IDA, with the same
phasing out period. In May 2010, ADF donors decided to suspend the phasing out during
2011 and 2012. During the ADF XI replenishment discussions, donors agreed on the
resumption of the phasing out period over an extended period (2013 to 2018).
Timor-Leste. Under ADF X, exceptional support to Timor-Leste was provided through
increased concessionality in ADF’s allocation: ADF provides a portion of its assistance to
Timor-Leste as grants, without a volume discount, irrespective of the country’s risk of
debt distress. The phasing out from the exceptional support started in 2009 took the form
of a reduced share of grants in the overall allocation. The initial phasing out schedule
was as follows: 100 percent during 2009 and 2010, 67 percent during 2011 and 2012, 33
percent during 2013 and 2014. Considering Timor-Leste’s progress, however, ADF
donors decided (in the context of the ADF XI replenishment discussions) to bring
forward the end of the phasing out period to 2012.
Myanmar. ADB provided an initial special allocation of ADF resources to Myanmar in
January 2013. ADB will generally follow IDA's framework that defines a methodology
to allocation resources for re-engaging countries.
-45-
Annex 4: Portfolio Performance Rating: Method of Calculation and Incorporation in the
Allocation System
The IDA portfolio rating is aimed to capture the quality of active IDA projects in a recipient
country as a gauge of its current effectiveness in using IDA financing. The rating is constructed
from project supervision ratings in three steps:
Step 1: obtain the project supervision ratings for all active IDA projects in each country in the
four quarters of the last calendar year, and calculate the share of projects that are identified as
actual problem project in the total number of projects. The share of actual problem projects
(%APP) for the country is calculated as the averaged over four quarters to reduce data volatility.
Step 2: the share of actual problem projects is then adjusted with an age correction, which is
needed because countries with a young portfolio tend to have fewer problem projects and
therefore higher portfolio performance ratings merely because it is too early for problems to
surface. For this adjustment, a deterioration factor (D), which reflects the average increase in the
share of actual problem projects per year, is first calculated by dividing the share of actual
problem projects of the entire IDA portfolio with its average age. Next, if the country’s average
age is higher than the IDA average, there will be no adjustment in the share; but if it is lower
than the IDA average, the deterioration factor is multiplied by the age difference in years and
added to the share of actual problem projects following the formula below, so that for each year
that a country’s portfolio is younger than the average age, the percentage of projects at risk is
increased by D.
%APP_Adjusted=%APP+(IDA average age - country portfolio age)*D
Step 3: Finally, the resulting share of actual problem projects after age correction is converted
into portfolio performance ratings using the conversion scale in the table below. The conversion
puts the portfolio rating into the same scale as the CPIA rating and facilitates its direct inclusion
in the calculation of the Country Performance Rating.
Share of actual problem projects after age
correction
0%
1-4%
5-15%
16-26%
27-67%
68-100%
Rating
4.5
4.0
3.5
3.0
2.5
2.0
Illustration
The following is a numeric illustration. Suppose that Country X has a total of 20 projects in its
portfolio, out of which 4 are problem projects. The percentage of problem projects is then 4/20=
20%. Suppose also that the average age of this country’s portfolio is 2.5 years; it is younger than
the average age of IDA’s entire portfolio (3.1 years); and the deterioration factor is calculated to
be 5% per year. So an age correction is needed, which can be calculated as: 20% + (3.1-2.8)
*5% = 21.5%. This is the age corrected percent of problem projects. Using the conversion table
above, the portfolio rating for Country X would therefore be 3.0.
-46-
Annex 5: Exceptional Allocation Regimes: an Illustration
The exceptional regime for PC countries aims at providing enhanced financial support to the
eligible countries, maintaining the performance incentive, and ensuring a gradual transition
toward regular PBA system over time. In particular, the performance measure used in the
allocation (PCPI) is tailored to the post-conflict situation and the performance weight is lower
than regular PBA. The allocation of resources under this exceptional regime is conducted in four
steps as described below. An illustration on how these steps are implemented is provided at the
end of the annex.
Description of the mechanics of the exceptional PC regime
Step 1: Determine the country allocation using the regular PBA system as a baseline
(
∑
)
(
)
Where:

PBAi is the allocation to country i under the regular PBA system; and

N is the number of IDA-eligible countries.
Step 2: Calculate the notional post-conflict envelope based on Post-Conflict Performance
Index (PCPI) and population of the eligible countries
∑
Where:

the notional PC allocation per capita for an eligible PC country is determined by its
PCPI and using a conversion table (Table 1) below; and

Popi is the population of country i.
Table 1. PCPI and Notional Post-Conflict Allocations per Capita
PCPI score
2.0 to 2.5
2.5 to 3.0
3.0 to 3.5
3.5 to 4.0
4.0 to 4.5
4.5 to 5.0
Allocation maximum
(US$ per capita per annum)
3.4
6.0
8.5
11.9
14.4
17.0
Note that the notional post-conflict envelope is then deducted from the total IDA resource
envelope for allocation to all other countries that do not fall into the PC or RE categories.
-47-
Step 3: Determine the actual PC allocation based on Post-Conflict Performance Rating
(PCPR), population, and GNI per capita relative to all post-conflict countries
(
)
(
∑
)
(
)
Where:

PCPBAi is the post-conflict performance based allocation for country I; and

M is the total number of post-conflict countries.
Other things equal, a PC country with higher performance obtains a larger share of the notional
envelope.
Step 4: Apply a phase-out (proportional reduction) for countries in the phase-out period
(
)*(
/7)
Where:

PYi refers to the number of years in the phasing-out period.
The phasing-out formula ensures that the allocation is reduced gradually during the phasing-out
years to support a smooth transition to regular PBA system.
Exceptional allocations under the regime for RE countreis are determined following similar
steps, but the notional per capita allocation is half of that for post conflict countries with the
same PCPI, and the phase-out period is shorter.
An illustration of the post-conflict allocation regime
Below is an example illustrating steps 2 and 3 of the allocation of resources under the
exceptional regime for PC countries. The assumed allocation parameters of three countries A, B
and C are provided in Table 2; Figure 1 shows that the notional envelope changes when a new
country (in this case country C) joins in year T+1; while Figure 2 illustrates how the envelope is
redistributed among the countries in year T+2.
Table 2. Post-conflict Allocation Parameters for the Illustration
A
10
GNI per
capita
(constant)
300
B
10
600
120
4
4
4
C
10
100
60(from
n.a.
3
5
Population
(constant)
Notional
envelope
(constant)
60
T+1)
PCPR
Year T
PCPR
Year T+1
PCPR
Year T+2
3
3
5
-48-
Figure 1. Illustration of Changes in Notional Envelope
A
A
A
B
B
B
C
C
Figure 2. Illustration of the Full Post-Conflict Allocation
140
A
B
C
120
100
80
60
40
20
0
Notional envelope
PCPBA T
PCPBA T+1
PCPBA T+2
It can be observed that

The eligible countries’ final PC allocations are affected by their relative income and
relative performance within the PC group, as well as the size of the notional envelope that
may change when countries join (or leave) the post-conflict window;

Country B obtains less than its notional envelope because it has higher GNI per capita
than countries A and C at T and T+1, and its lower performance at T+2 relative to the
others contributed to a further decline;

Country C obtains an allocation increase between T+1 and T+2 largely due to its
performance improvement, and having a lower GNI per capita also allows it to capture a
larger share than A at the same performance level at T+2.
An illustration of the phase out in one post-conflict country:
Post-conflict countries are expected to achieve performances improvements over time to similar
levels as other IDA countries at the same income level, and therefore the phase out mechanism
has been introduced to smooth the transition so that post-conflict allocation is gradually reduced
to regular PBA level by the time a country exits the post-conflict window. Figure 3 shows that
the phase out schedule is jointly determined by its full PC allocation and its regular PBA
allocation from year 4 to year 10 so that in year 11 (the first year after the 10-year regular PC
duration), its allocation is the same as regular PBA level.
-49-
Figure 3. The Phase out from Post-Conflict Allocation to PBA in one PC country
Initial full PC allocation
PC allocation with
annual phase out
Regular PBA
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11
-50-
Annex 6: Post-Conflict Performance Indicators Framework
The Post-Conflict Performance Indicators (PCPI) is a set of criteria used to measure
performance in countries eligible for IDA allocations under the exceptional PC and RE
regimes. They are a key component of the framework for allocating resources since the
inception of these regimes in IDA13.67
The PCPI assesses the quality of a country’s policy and institutional framework to support a
successful transition and recovery and to foster sustainable growth, poverty reduction, and the
effective use of development assistance. It has been tailored to the specific circumstances faced
by these countries and their content reflects the emerging consensus that addressing the
development challenges in fragile situations requires a deep understanding of the links among
the security, political, economic, and social spheres.68 Given the range and complexity of such
relations, some topics that fall outside the Bank’s traditional development mandate are
considered. In conducting the PCPI assessments, however, the World Bank does not intend to go
beyond its mandate but to improve the effectiveness of its development interventions in these
countries. In that regard, the assessments are undertaken in an objective and impartial manner
that does not entail passing a judgment on a member country or its government.
PCPI assessments for countries eligible for exceptional PC and RE allocations are
performed each year reflecting the latest country developments. As part of the PCPI
exercise, Bank teams prepare initial assessments that are subject to Bank-wide review. The
assessments are based on a variety of indicators, observations, and judgments reflecting country
knowledge that is originated in the Bank or elsewhere and relevant publicly available indicators.
Each criterion includes a set of indicators or guideposts that can be useful in the preparation of
the assessments and in guiding the internal review process.69 These indicators contain qualitative
or quantitative information prepared by the Bank or other sources.
When preparing the assessments, Bank country teams undertake a series of consultations.
These consultations, which include consultations with government counterparts and the Bank’s
partners, aim at ensuring that the assessments cover the relevant developments in the country and
take into consideration the analyses of other international agencies that may have particular
expertise in areas that fall outside the Bank’s traditional development domain—for example, the
UN with respect to security‐related issues.70 The consultation process helps strengthen the
robustness of the Bank’s assessment. Accountability for the final scores rests with Bank staff.
The PCPI criteria have been refined periodically to incorporate lessons of experience and
new insights from the development literature. The last round of revisions took place in the
context of IDA15 and was informed by the recommendations of an external panel and insights
67
68
69
70
The original PCPI framework is presented in the document " IDA 13: Adapting IDA’s Performance-Based
Allocations to Post-Conflict Countries," May 2001.
The PCPI includes elements that are not captured in the CPIA (e.g., security, demobilization and reintegration
of ex-combatants, political and reconciliation processes, and reintegration of displaced populations).
Moreover, the indicators were formulated to take account of the lack of reliable information and data that often
characterize these countries.
For the PCPI criteria please see: http://www.worldbank.org/ida/ISIA/2010_PCPIcriteriaFinal_July_25.pdf.
This process should be understood as a consultation, not a negotiation of the scores.
-51-
from evolving views on fragility and conflict, including from the 2011 WDR.71 The revision to
the PCPI framework included:



Content. The indicators were reorganized in four clusters to clarify and simplify their
content (Economic Management and Structural Policies; Social Inclusion and Human
Development; Governance; and Post-Conflict Risk). The first three clusters are used to
assess RE countries, while all four are used to assess PC countries;
Links to the CPIA. A more explicit link between CPIA and PCPI was introduced
whereby a broad correspondence was established between PCPI scores of 5.0‐6.0 and
CPIA scores of 3.0‐3.5;72 and
Process. The PCPI process has been modified to increase its alignment with the CPIA
process, in particular regarding the internal review process and consultations with country
authorities.
PCPI scores for countries eligible for exceptional PC and RE allocations are publicly
disclosed. The revised PCPI framework and criteria have been applied in FY11 and FY12. The
resulting overall scores have been publicly disclosed by the end of the IDA15 period. This
decision, part of IDA’s efforts to increase the transparency of its allocation framework, mirrors
the disclosure of the CPIA scores for IDA‐eligible countries, which began in 2005.
Structure. The PCPI is organized around four clusters: (A) Economic Management and
Structural Policies; (B) Social Inclusion and Human Development; (C) Governance; and (D)
Post-conflict Risk (See Table below). Clusters i, ii and iii are common clusters that are used to
assess the performance of all countries eligible for exceptional allocations. Cluster iv is designed
to assess progress in areas that are particularly pertinent in PC situations. The need to assess the
extent of the progress in these crucial areas for post-conflict settings provides the rationale for
their inclusion in the PCPI as a separate cluster.
Table 1: PCPI Framework
Cluster A: Economic Management and Structural Policies
1) Macroeconomic management
2) Debt management
3) Functioning of public administration
4) Business environment
Cluster B: Social Inclusion and Human Development
5) Human resource building
6) Vulnerable groups, gender and social cohesion
Cluster C: Governance
7) Capacity of public administration
8) Rule of law
9) Accountability and transparency
71
72
The PCPI has built, inter alia, on the OECD-DAC body of research on such topics as peace- and state-building,
the provision of transition financing, and the design of risk frameworks for effective engagement in FCS. By
the same token, the UN has underscored the importance of security sector reforms. The PCPI revised criteria
have taken into account these developments and advances in the dynamics of FCS.
This relationship, however, should be understood as a reference point, given that the contents of the two sets of
criteria do not fully overlap. The new mapping between the CPIA and the PCPI makes the PCPI a more
granular instrument to assess performance of the countries that are eligible for IDA’s exceptional PC and RE
allocations, while focusing its content more sharply on the most important issues faced by these countries.
-52-
Cluster D: Post-conflict Risk (only for post-conflict countries)
10) Security
11) Management of conflict and recovery
12) Peace-building
-53-
Annex 7: The New Deal, Peace- and State-Building Goals and Indicators
The New Deal for Engagement in Fragile States was adopted at the Fourth High Level
Forum on Aid Effectiveness in Busan in December 2011. The New Deal puts the voice of
fragile states and their people at the heart of their own country led and owned peace-building and
state-building solutions with the support of their international partners. The New Deal has three
interconnected and interdependent parts: (i) The Peace-building and State-building Goals
(PSGs); (ii) the FOCUS principles for engagement;73 and (iii) the TRUST set of commitments.74
The PSGs are the pillars of the New Deal and highlight legitimate politics, security, justice,
economic foundations and revenue and services. To strengthen and promote these goals, as a
framework for national and international engagement, it was agreed in the New Deal to develop
a set of simple and practical indicators to track progress towards the PSGs at the country and at
the global level (i.e., across countries). These peace-building and state-building indicators have
multiple applications (see chart below). At the country level they can be used to assess
conditions in the country, be used for planning and prioritization and for monitoring progress.
At the global level, these indicators can also be used for benchmarking and to demonstrate
progress collectively among the g7+ and other fragile countries.
73
The FOCUS principles for engagement are: (i) fragility assessments developed by the g7+ with the support of
international partners; (ii) a country-led "one vision, one plan"; (iii) a compact between the country and partners to
implement the plan; and (iv) support of political dialogue and leadership.
74
The TRUST set of commitments refer to the enhancement of transparency, risk-sharing, use of country systems,
strengthening capacity and ensuring timely and predictable aid.
-54-
In January 2012, the International Dialogue Steering Group decided to establish working
groups on indicators and implementation. Each group comprises 15-20 International
Dialogue members and is co-chaired by a member of the g7+ and the international community.
Since inception, the International Dialogue has supported the g7+ in the piloting of fragility
assessments and testing of the fragility spectrum – central commitments of the New Deal – while
developing a list of indicators that can be used to monitor peace-building and state-building.
A critical first step for the process was the development of an analytical framework for the
fragility assessments and the indicator development. The framework identifies a number of
key dimensions for each PSG to allow a better understanding of them. This framework was
developed and elaborated by the Indicator Working Group in Copenhagen (March 2012) and
Nairobi (June 2012). In addition to these meetings, the group worked virtually or alongside
other meetings (e.g., by the g7+) to finalize the framework. Multiple sessions were required due
to the complexity of the process, the need to build a common understanding of what peacebuilding and state-building mean, and the importance to ensure g7+ ownership and leadership
throughout the process.
The g7+ countries combined the process of selecting indicators with the piloting of fragility
assessments and testing of the fragility spectrum. These processes were intended to also
inform and contribute to ongoing development planning processes. Fragility assessments were
conducted in DRC, Liberia, Sierra Leone, South Sudan and Timor-Leste. These fragility
assessments helped to identify areas for measurement and identified initial indicators to measure
progress against country-specific priorities. The working group provided inputs to the
development of key analytical tools, including interim guidance for conducting a fragility
assessment and technical support throughout the process. The g7+ Secretariat provided a
template for completing the fragility spectrum.
Predictably, each piloting country adopted a distinct approach to developing their fragility
assessments, field-testing their spectrums, and identifying appropriate indicators. The g7+
representatives from the five pilot countries shared lessons learned from the fragility assessments
at the third meeting of the Indicator Working Group in New York in September 2012,
demonstrating progress and revealing diverse examples of how the fragility assessment can be
implemented. Key lessons from the fragility assessment are captured in a separate lessons
learned report and are available online at the g7+ website.75
The working group established a set of principles for g7+ countries to guide the selection of
common/shared indicators and country indicators. These principles emphasized the need for
simple, relevant indicators that can be adapted to the country context, reflecting both short and
longer-term progress. Indicators should avoid duplication with more general development
indicators (e.g., MDGs). They should also reinforce national statistical capacity, and emphasize
reliable and transparent data collection mechanisms.
At its third meeting in New York, members of the working group identified a number of
common areas for measurement which were based on the initial g7+ country indicator lists.
These common areas were then taken back to the country level and were used by the g7+ pilot
countries to identify and further develop their list of indicators. To share experiences, assist g7+
countries in developing their list of country-specific indicators and develop a proposal for
75
http://www.g7plus.org/
-55-
common/shared indicators, a South-South exchange was held from 21-22 October 2012 in
Nairobi. The meeting brought together fragility assessment focal points, representatives from
national statistics offices and civil society from eight g7+ countries. On the basis of country lists
and discussions, the meeting agreed on a set of 64 common/shared indicators as basis for
discussion and consultations. This indicator list was further revised in Nairobi after a series of
expert consultations in December 2012 and January 2013 and reviewed in Nairobi on January
29-31, 2013. Another round of revisions to the shared/common list will be undertaken until
March 2013 and coincides with new fragility assessments being undertaken in other g7+
countries.
Preliminary indicators from the New Deal process would be used for monitoring progress
on peace-building and state-building. While consensus has not been reached on the indicators
that will be endorsed by the g7+ and the international community through the International
Dialogue process, notional indicators suggest that the short list could be useful to measure peacebuilding and state-building progress. These indicators include outcome variables, such as violent
deaths (per 100,000 population), inequality among regions, experiential indicators such as
surveys on experience of corruption and process indicators like number of judges per 100,000
population (by region). These indicators would serve as inputs to country assessment processes
and, with national ownership in their development and monitoring, provide an additional signal
of credibility to a reform process.
-56-
Annex 8: Comparing Current Exceptional Regimes and the Exceptional Regime for “Turn-Around” Countries
Current Exceptional Regimes
Exceptional Regime for “TurnAround” Countries
Comments
 A post-conflict country is:
i. a country where IDA engagement has
been disrupted by a severe and longlasting conflict or a short but highly
intensive conflict; or
ii. a newly sovereign state emerging through
a violent breakup.
 A re-engaging country is a country that has
experience a prolonged period of
disengagement from IDA marked by the
accumulation of arrears and that has
expressed its willingness to re-engage based
on a strong program with concerted donor
support.
 A “turn-around” country is a country
facing a critical juncture in its development
path marked by the:
i. cessation of an ongoing conflict; or
ii. commitment to a major change in the
policy environment following a prolonged
period of disengagement or a major shift
in its policy priorities.
 The exceptional “turn-around” regime has
more flexibility than the current exceptional
regimes. It moves away from a discrete
treatment of fragility allowing for enhanced
support to a broader set of countries
(including FCSs that have not experienced
major conflict or have not accumulated
arrears and non-FCS confronted to fragility
situations).
 Eligibility to exceptional post-conflict
support determined by:
i. extent of human casualties,
ii. proportion of population displaced or in
exile, and
iii. extent of physical destruction.
 Eligibility to exceptional re-engaging
support determined:
i. evidence of partial collapse of state; and
ii. accumulation of sizeable arrears.
In addition, eligibility under both exceptional
regimes is based on the provisions of OP2.30.
 Eligibility to exceptional “turn-around”
support determined by evidence that a
country:
i. has been significantly affected by conflict
and/or collapse of state (based on PCPI
indictors), and
ii. is confronted to a “turn-around” situation
and is committed to take action to make
the most of the opportunities presented by
that situation (based on the provisions of
OP2.30.).
i. Definition
ii. Eligibility

 This new approach:
i. acknowledges the heterogeneity of fragile
situations, where countries are confronted
to different types and combinations of
violence, stresses and other challenges;
ii. acknowledges that fragility and violence,
in all forms, can have a devastating
human and developmental impact;
iii. acknowledges that enhanced support, if
timely and adequately targeted, can help
countries exit/avoid fragility traps; and
iv. focusses on identifying windows of
opportunity for reform and on modulating
the adequate level of support to help
countries seize these opportunities.
 The eligibility criteria for the “turn-around”
regime build on IDA’s implementation
experience. They:
i. use similar principles, criteria and signals
that have made the current exceptional
regimes successful tools for selective reengagement; and
ii. promote broader use of the PCPI
(common metrics adapted to the FCSs’
special circumstances)
 When possible, enhanced role of country
portfolio performance in eligibility decisions.
-57Current Exceptional Regimes
Exceptional Regime for “TurnAround” Countries
Comments
iii. Duration
 Exceptional post-conflict support provided
for 10 years, which include 6 years of
phasing-out to the regular PBA allocation
level.
 Exceptional re-engaging support provided
for 5 years, which include 3 years of phasing
out to the regular PBA allocation level.
 Case-by-case extension of phasing out
periods agreed in the context of IDA16.
 Full level of support aligned with the
duration of national transition plan associated
with “turn-around” situation (2-3 years).
 Possibility of re-application if transition is
successful and new transition plan is
prepared.
 Phasing-out to the regular PBA allocation
part of re-application discussions.
 The exceptional “turn-around” regime moves
away from setting pre-established
timeframes. This:
i. reflects IDA’s implementation experience
with the current exceptional regimes;
ii. responds to the analytical findings
regarding the protracted nature of fragility
and conflict; and
iii. acknowledges that the path out of fragility
and violence can vary significantly from
country to country.
 Provides flexibility for:
i. continued enhanced support if a country’s
transition is successful or for withdrawing
it if there has been no progress;
ii. modulating the level of exceptional
support to ensure a timely and smooth
transitioning to the regular PBA system.
 Ensures alignment of exceptional support
with national strategic planning.
iv. Allocation Process
Performed each year following a two-step
process
Step 1: Calculation of notional country
allocation
Performed each year following a simplified
process
 The allocation process for the “turn-around”
regime builds on IDA’s implementation
experience. In comparison to the current
exceptional regimes:
i. it preserves their positive features (e.g.,
responsiveness to changing country
circumstances, reduction of country-level
impact, resilience to fluctuations in donor
support, and adequate balance between
rules and qualitative judgment); and
ii. it addresses their shortcomings (e.g., it
enhances transparency by simplifying the
allocation process, avoids setting preestablished phasing out trajectories).
 The allocation process for the “turn-around”
regime also provides for an increased role of
a country’s portfolio performance in
allocation decisions. This would:
 For post-conflict countries, notional
country allocations based on PCPI score
(at the time of eligibility) and notional
maximum per-capita allocations agreed in
IDA14 (adjusted by changes in
replenishment size).
 For re-engaging countries, notional country
allocations determined in similar way, but
notional maximum per-capita allocations
half that for post-conflict countries.
 Flexibility to address country-specific issues
(first year allocation).
Step 2: Calculation of yearly envelope
 The yearly envelope equals the sum of
 Country allocation based on latest PCPI
scores and PPRs and per-capita allocation
matrix approved at the time of eligibility
determination. It should be noted that:
i. the per-capita allocation matrix is based
on notional maximum per-capita
allocation levels agreed with donors;
ii. it will be expected that countries with
greatest needs (e.g., post-conflict) will
have access to the levels close to the
notional maximum per-capita levels; and
iii. room for qualitative judgment to consider
country-specific circumstances, including
for the determination of first year
allocation.
 Per-capita allocation matrix reconsidered as
-58Current Exceptional Regimes
notional country allocations.
Step 3: Allocation of yearly envelope
 Based on allocation formula in which:
i. the quality of policies and institutions
are measured by PCPI scores;
ii. the PPR carries a high weight (20%)
in the calculation of the CPR; and
iii. poverty-orientation is greater than
under the regular PBA system (CPR
exponent of 2).
 Data in the formula reflects latest
available information to enhance
responsiveness of IDA allocations and
create incentives for performance.
Exceptional Regime for “TurnAround” Countries
part of re-application process (to reflect
recalibrations of notional maximum percapita allocations or to ensure timely and
smooth transition to regular PBA system).
Comments
i. better respond to recent empirical findings
regarding the role that project-level
factors can play in portfolio performance;
ii. allow eligible countries to capitalize on
improvements on portfolio performance
(including those that could result from
implementing the modernization agenda);
and
iii. enhance incentives for portfolio
performance.
-59-
Chart 1: Resource Allocation Process - Possible Exceptional “Turn-around” Regime Compared to the Current Exceptional
Regimes for PC and RE Countries
Possible Exceptional “Turn-around” Regime
Step 1. Determining Country Per-capita Allocations
(at application/re-application)
Step 2: Determining yearly country allocation
Current Exceptional Regimes for PC and RE Countries
Step 1: Determining Notional
Country Allocations
(at eligibility)
Step 2: Calculation of Notional
Envelope
(yearly)
Step 3: Allocation of Notional
Envelope
(yearly)
Allocation
Country 1
Notional
envelope
Allocation
formula
...
Allocation
Country N
-60-
Annex 9: Definitions and Assumptions
This annex presents the definitions and assumptions used throughout this document.
Definitions

Fragile and Conflict-affected States (FCSs). Countries that: (i) have a harmonized
average CPIA country rating of 3.2 or less (or no CPIA); or (ii) have or have had a UN
and/or regional peace-keeping or peace-building mission during the past three years.

Small States (SS). Countries with a population of 1.5 million or less.

Post-conflict (PC) country. Country eligible for IDA support under the exceptional
allocation regime for post-conflict countries. A post-conflict country is defined as: (i) a
country where IDA engagement has been disrupted by a severe and long-lasting conflict
or a short but highly intensive conflict; or (ii) a newly sovereign state emerging through a
violent breakup.

Re-engaging (RE) country. Country eligible for IDA support under the exceptional
allocation regime for re-engaging countries. A re-engaging country is defined as a
country that has experienced a prolonged period of disengagement from IDA marked by
the accumulation of arrears.

Turn-around country. Country confronted to a critical juncture in its development
trajectory marked by: i) the cessation of an ongoing conflict; or ii) the commitment to a
major change in the policy environment either following a prolonged period of
disengagement from Bank lending or a major shift in its policy priorities.
Assumptions
Below are detailed the key working assumptions used to project IDA allocations for the period
FY14 to FY17 under the baseline scenario (i.e., the scenario that assumes the continued
application of the current allocation framework which is composed of the regular PBA system
and the exceptional allocations for PC and RE countries).
IDA17 allocable envelope.

It is assumed that the IDA17 allocable envelope remains the same as for IDA16
(SDR28.7 billion). This figure includes the potential transitional support to India (a
graduating country), which is assumed to reach two-thirds of its IDA16 capped
allocation.
Country eligibility

Eligibility for IDA financial support. It is assumed that, except for graduations, the set of
countries eligible for IDA financial support during IDA17 will remain the same as in
IDA16. Five countries are assumed to graduate from IDA eligibility at the end of IDA16:
Angola, Armenia, Bosnia and Herzegovina, Georgia and India.
-61-

Eligibility for support under the exceptional regimes for PC and RE countries. For
countries currently benefiting from exceptional PC and RE support, no further extensions
of the phase out period is assumed beyond those approved in the context of IDA16.
Allocation formula

It is assumed that the allocation formulas used in IDA17 under the regular PBA system
and the exceptional regimes for PC and RE countries would remain the same as in
IDA16.
Allocation parameters

CPIA scores, PCPI scores, GNI per capita, and population figures are assumed to remain
constant at the levels used to determine the IDA allocations for FY13. A similar
assumption is applied regarding the country's grant eligiblity.

In case of missing values for CPIA or PCPI scores, the values used were the last ones
available or (if the country does not have previous PCPI/CPIA scores) the lowest
CPIA/PCPI scores in the category (e.g., PC or RE).
Other assumptions

FCSs status reflects the FY13 list of fragile situations.